Clovis Oncology Inc (CLVS) 2013 Q2 法說會逐字稿

Good day, ladies and gentlemen and welcome to Q2 2013 Clovis Oncology Inc. earnings conference call. My name [Dilys] and I will be your operator today. (Operator Instructions).

As a reminder this call is being recorded for replay purposes. I would now like to turn the call over to Ms. Anna Sussman, Senior Director of Investor Relations. Please proceed, ma'am.

Thank you, [Doulou]. Good morning, everyone. Welcome to the Clovis Oncology second quarter 2013 conference call. You should have received the news release announcing our second quarter results. If not it is available on our web side. As a reminder, this conference call is being recorded and webcast. Remarks may be accessed live during our webcast during the -- our website during the call and will be available in our archive for the next several weeks.

The agenda for today's call is as follows. Patrick Mahaffy, Clovis' President and CEO, will discuss the highlights of the second quarter of 2013 and provide an update on our clinical development program. Then Erle Mast, our Chief Financial Officer, will cover the financial results for the quarter in more detail and comment on the Company's outlook for 2013. Patrick will make a few closing remarks and then we will open the call for Q&A. Our Chief Medical Officer, Andrew Allen, is also on the 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 plan. 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. 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. Now, I will turn the call over to Patrick Mahaffy.

Thanks, Anna. Welcome everybody. Thank you for joining us this morning. We have made very important progress during the second quarter in our clinical development programs. At ASCO in June we announced encouraging initial responses in patients enrolled in the dose finding portions of our ongoing studies for both CO-1686 and rucaparib, and we look forward to providing updates for each study at medical conferences this fall. We've selected a dose for rucaparib for use in the Phase II biomarker trial and pivotal Phase III trial both of which are scheduled to commence enrollment later this year. And for 1686 we have identified a starting dose for the improved hydrobromide salt tablet formulation which we plan to introduce later this month into the ongoing dose finding portion of the Phase I/II study.

This morning I would like to take the opportunity to highlight our plans and expectations for our clinical development programs for 1686 and rucaparib for the remainder of the year. 1686 is our oral targeted small molecule covalent inhibitor of the mutant forms of epidermal growth factor receptor or EGFR for the treatment of non-small cell lung cancer. 1686 targets both the initial activating EGFR mutations as well as the dominant resistance mutation T790M and it has the potential to treat non-small cell lung cancer patients with EGFR mutations both as a first line and second line treatment. Importantly because 1686 spares wild type or normal EGFR it has the potential to cause a lower incidence of toxicities such as skin rash and diarrhea that are normally associated with other EGFR inhibitors.

At ASCO in June we reported initial findings from the Phase I portion of the Phase I/II study currently underway. These results include the following, full resist partial responses were observed in heavily pre treated T790M positive patients. Three of four evaluable T790M positive patients who were treated at the 900 milligram BD or twice daily dose achieved PRs. The fourth had stable disease. 1686 appeared to be well tolerated with no evidence of wild type EGFR inhibition.

Importantly and as expected, 1686 activity is correlated with higher drug exposure. Specifically we observed that maintenance of trough plasma concentrations over 200 nanograms per mL for greater than 16 hours is associated with superior progression free survival versus for patients with shorter exposures.

I would like to take the opportunity today to provide an update of the current status of these patients. All four of the patients who had RECIST PRs announced at ASCO continue to be PRs. These patients have now been on CO-1686 therapy in a range of approximately four to eight months duration.

Additionally we have enrolled 11 more patients into the Phase I dose escalation study with a capsule formulation at the current dose of 900 milligrams twice daily. We plan to enroll two additional patients in early August for a total of 19 patients enrolled at this dose. This number includes both T790M positive and T790M negative patients. We do not yet know what percentage of the patients are T790M positive.

Moving forward these patients will be grouped together as the 900 milligram BID cohort in the ongoing Phase I portion of the Phase I/II trials and updates will be provided at medical meetings. The first update of the Phase I data will be in an oral presentation at the 15th World Conference on Lung Cancer in Sydney, Australia on Monday, October 28. Book your flights now. Since the MTD has not been achieved we will continue dose escalation on the study with the tablet formulation later this month. To date we do not see evidence of wild type inhibition, we have not seen any serious diarrhea for any cases of rash.

As we get to higher doses we are of course beginning to see other toxicities, and expect that we will define a dose-limiting toxicity and establish a Phase II dose by year end. We cannot today, however, know what that dose limiting toxicity will be. During the quarter we completed the study of 1686 in healthy human volunteers which compared the PK properties of our hydrobromide salt tablet formulation with the current capsule formulation. As expected and consistent with animal studies, the tablet demonstrated improved exposures and reduced variability.

Based on data from this study we have selected a starting dose of 500 milligrams BID for the tablet formulation and we expect to start dosing patients with this formulation later this month. As noted we expect to achieve the recommended Phase II dose by the end of the year and to then initiate the Phase II expansion cohorts with the tablet formulation. The two cohorts include a study of 1686 in non-small cell lung cancer patients who have progressed while on treatment with EGFR directed therapy such as Tarceva or ERISA, and have developed the T790M resistance mutation, which we expect to initiate late 2014. And a study of 1686 in an expansion cohort of newly diagnosed patients who expressed the activating mutation to EGFR, which we expect to initiate in early 2014.

By inhibiting both the activating mutations of EGFR and its dominant resistance mutation, we are able to demonstrate a meaningful progression free survival benefit compared to what has been seen to date for Tarceva or afatinib or other TKI therapies, we would be in a position to move 1686 into a front line development program. Each of these cohorts will number approximately 40 patients. Pending data from the second line T790M positive cohort, our goal is to commence a registration study in the second half of 2014 in this population. We also planto initiate a Phase I study of the tablet formulation in Japan in early 2014.

Also during the quarter we received orphan drug designation from the FDA for 1686 for the treatment of EGFR mutated non-small cell lung cancer. It goes without saying that 1686 generated a lot of attention from the clinical community and we are very excited about the potential for this program. Now turning to rucaparib. Rucaparib is our oral, potent, small molecule inhibitor of PARP-1 and PARP-2 which we are [extolling] as both a monotherapy and in combination with chemotherapeutic agents in ovarian cancer patients who are predisposed to PARP inhibitor sensitivity.

At ASCO in June we reported initial findings from the dose finding Phase I study currently underway. These results included the following. Objective responses were observed in BRCA mutant ovarian, breast, and pancreatic cancer patients. 89% clinical benefit rate observed in BRCA mutant ovarian patients across all doses. Rucaparib was well tolerated at doses studied. And consistent therapeutic drug exposures were observed with twice daily dosing with predictable exposures for a given oral dose. This is important as it could potentially reduce the risks of under or over dosing when uniform drug doses are administered to patients.

We have positive updates for these patients as well. Each of the patients who had achieved the PR and was active on study at ASCO has maintained their partial response. As we mentioned last quarter we believe we were close to establishing a dose and that we were pleased with the drug plasma levels, the evidence of efficacy, and the disease control we observed to date. I tell you that based on data from the dose finding Phase I study we have determined a recommended Phase II and Phase III monotherapy dosing schedule of 600 milligrams twice daily.

We expect to initiate the Phase II single arm study to assess the efficacy of rucaparib in women with recurrent platinum-sensitive high grade [serious] ovarian cancer in the fourth quarter. We have previously referred to this study as the biomarker study, but have now named it ARIEL2, the assessment of rucaparib in ovarian cancer Phase II trial. We also expect to initiate the global Phase III registration switch maintenance study for rucaparib in platinum sensitive ovarian cancer patients with efficacy analyses pre-specified in populations defined by deficiencies in BRCA and other DNA repair genes which we have named ARIEL3, by the end of this year. We will provide an update from the Phase I monotherapy study at the European cancer conference in 2013 in Amsterdam where it has been accepted as a poster presentation on Sunday, September 29. Let me turn the call over to Erle to discuss second quarter 2013 financial results and guidance for the year.

Thanks, Pat. Good morning, everyone. Our full financial results are in this morning's press release so I will direct my comments to financial highlights for the second quarter. We reported a loss of $19.3 million or $0.72 a share for the second quarter of 2013.

The net loss for the first half of the year was $35 million or $1.33 per share. Research and Development expenses totaled $15.8 million for the second quarter of 2013 and $27.9 million for the first half of the year.

R&D expenses for the second quarter of 2013 increased by $3.7 million over the first quarter of 2013. Now this increase is due primarily to expanded development activities for rucaparib, most notably startup expenses incurred for the ARIEL2 and ARIEL3 studies as well as a milestone payment made for ongoing investigator sponsored clinical study. R&D expenses for the second quarter of 2013 also increased over the second quarter of 2012 by $3 million due to development activities for CO-1686 and rucaparib as well as the initiation of the cKIT inhibitor discovery collaboration that we announced and commenced last July. These increases were partially offset by wind down of development activities for CO-101 which began late last year.

And finally, our total operating expenses for the second quarter of 2013 included $2.1 million of share based compensation expense and $3.9 million for the first half of 2013. Our cash burn from operations for the first half of 2013 totaled $32.3 million. And we expect cash burn for the full year to be approximately $65 million.

As of June 30, we had $372.2 million in cash and investments and 30.2 million outstanding shares of our common stock. Quarter end cash balance reflects $259 million in net proceeds we received from the sale of common stock that we completed in June and we expect to end 2013 with approximately $340 million in cash. With that I will turn the call back to Pat for some closing comments and then we'll open it up for Q&A.

All right. Let me talk about our anticipated milestones for the second half of 2013. For 1686 first we plan to transition to the tablet formulation of 1686 later this month. And continue and ultimately complete the dose escalation portion of the ongoing Phase I/II trial to establish the optimal dosing schedule before the end of the year. We expect to initiate the Phase II expansion cohort to assess efficacy in second line T790M positive non-small cell lung cancer patients in late 2013 and in first line non-small cell lung cancer patients in early 2014.

Overall the intent is to advance the clinical development program in order to initiate a registration study in second line T790M positive patients in the second half of 2014. Turning now to rucaparib. Before the end of the year commence enrollment in the Phase II biomarker study ARIEL2 and a pivotal Phase III study, ARIEL3, in platinum sensitive ovarian cancer patients. Lastly for our cKIT inhibitor program with Array, we intend to identify a product candidate by the end of this year or during the early part of 2014.

In closing we are pleased with the results to date for both compounds and look forward to continuing to advance the clinical development programs and providing updates on these studies underway later this fall. With that thanks for joining us and we will now open up the call for any questions you may have.

Thank you. (Operator Instructions). This is from the line of Charles Duncan of Piper JaffrayPlease go ahead, sir.

Hi guys. Thanks for taking my question and congratulations on good progress in the quarter. Pat first question is what is the status of the patient that had stable disease that was reported at ASCO? Any progress in their disease?

That patient still has stable disease.

And then can you update us on breakthrough status? It is not entirely clear to everyone how that is sought and granted. Is that generally after Phase II data or could you see that before on 1686?

It is not actually he generally clear to anybody. So it is not unique to investors. On breakthrough status I've said this publicly before. I know it is on the mind of investors. It wouldn't change anything we are doing right now and one of the things that [Pasdar] said at the meeting at ASCO, on the Wednesday before ASCO is they have seen companies request it too early and they have been told no.

We will have a meeting with the FDA we anticipate sometime in the fall and discuss with them break through status process to apply. And what we have anticipated is when we have a little more data including on the patients that we have enrolled beyond the first six at 900 milligrams twice daily we would probably be in a position to apply for that status. So we haven't applied yet. We will intend to. I would anticipate that would be as early as before the end of this year. Obviously keep you updated on the progress of that.

And my final question is on rucaparib. Wondering if you could differentiate your approach relative to others who may be studying germ-line BRCA mutations and compare that to your HRD deficient tumor approach and wondering if that would have an impact on timelines, potential competitive positioning, and regulatory?

Well, it is -- I will try. It is hard to know what everybody's timelines ultimately will be. But I will state it like this. Our understanding is that (inaudible -- background noise) is being tested in a first line setting limited to patients with germ-line mutations of BRCA.

We also know that TESARO is testing their compound both in a maintenance setting, that is in patients who have shown benefit from platinum based therapy, in patients either who have germ-line mutations of BRCA or in the fuller context patients who have shown a benefit from platinum responsiveness. So they're either looking uniquely at germ-line mutations of BRCA where all of us believe these -- all of these PARP inhibitors should provide benefit, but also looking at a broad population of women who benefited from the platinum.

We believe that our study in the end is going to be that Goldilocks study that looks of course, at women with mutations of BRCA, but because we are using a tissue based [assay] we'll be able to look at both germ-line and somatic mutations of BRCA simultaneously. And that allows us to look at a population that is inclusive of the 15% of women with ovarian cancer who have germ-line BRCA mutations but also that other 7% or 8% of women who have somatic mutations of BRCA. Our first look will be a population of around 23% of women with ovarian cancer as opposed to 15%. We are the only ones to our knowledge that are looking at a pre specified group of patients that number another about 25% of women who have mutations of other genes associated with DNA repair deficiency.

These patients should behave, and the early evidence from the study reported at ASCO for competitive compounds, is that they do behave similarly to women with BRCA mutations. And so our hope is that by looking at BRCA specifically,, 23% or so, and then BRCAness as a step-down analysis, we will be able to direct our drug to those patients with BRCA or BRCAness who we all would I think agree are most likely to benefit from a PARP inhibitor. If in fact it is true that for reasons we can't describe biologically just because you respond to a PARP inhibitor -- or a platinum you are going to respond equally well to a PARP inhibitor , that's also included in our analysis. So we will also be looking finally at just platinum responsiveness as a third step-down analysis. What we believe is that the driver of the responsiveness in patients with -- who respond to a platinum is in fact those patients who have either a mutation of BRCA or other genes associated with DNA repair deficiency.

We think ours is a thoughtful design and allows us to direct our drug to patients most likely to benefit from it. It terms of timelines, one could suggest or predict that Alacra and AstraZeneca would be first because they are looking uniquely at these women with germ-line mutations of BRCA but probably isn't quite true since because they are looking at a first line setting one could predict that the time to achieve progression free survival is going to be quite lengthy. So it's hard to predict exactly when -- there's not a lot of precedent in this patient population being explored to PARP inhibitor, so we don't know how long that progression free survival period will be but it may be that because we're looking at this first line setting that all of our data will emerge in a relatively similar time frame, relatively similar.

Makes sense. Thanks for the added color.

Sure.

Thank you. The next question from the line of Ravi Mehrotra of Credit Suisse.

Hi, good morning guys. Thank you for taking my question. All on 1686. First can you remind us about the trial set-up with the hydrogen bromide formulation specifically --

Ravi, you got to get closer to your phone.

Let me pick up my hand set is that better?

Yes.

All of the questions on 1686. Number one,can you remind us about the trial setup for the hydrogen bromide formulation, specifically the gating points for step up of those over and above the 500 that you talked about for the initial. Secondly can you tell us of the calendar cutoff for the data that you are going to present at World Lung? And thirdly could you remind us of the primary and secondary endpoints of the Phase II studies that you talked about?

Okay. Andrew, do you want to talk about the dose and the dose escalation for the hydrobromide salt?

Just to say, Ravi, that it is a CRN design, so that's acontinuous reassessment method. So there is dose escalation which is a little bit more adaptive than a standard three plus three design without the structure of the remaining Phase I component of the program.

As to the date -- is that oh okay, Ravi, have you got -- Ravi?

Yes.

As for the calendar date of the cutoff if you will for the World Lung data, it is going to be sometime in October. I would imagine we will need to prepare those posters and be ready to present mid-October. October 15, 16, 17. For ASCO we scrambled to get that PR into the poster so we had shown an ability to move quickly here. But I would assume it is on the order of the 15th or so of October.

Okay.

And then in terms of the primary and secondary endpoints in the Phase II studies just to make sure I understand which studies you mean, do you mean the expansion cohorts, the Phase II portion of the ongoing Phase I/II or do you mean in a registration study?

The registration study, sorry.

Okay. So all of you know that there is uncertainty in what that Phase II design will be until we exactly -- until two things happen, we know what the response rate is from the ongoing Phase I/II study we are doing, and secondly until we have an interaction with FDA. What we believe is that Pfizer and crizotinib have laid out a very credible and predictable path for 1686 that in the event we show an encouraging response rate in the continuing study of 1686 and T790M positive patients, including in the expansion cohort and [by] encouraging I think if it is a third of patients, 33% or more show a response rate or a response that it is highly likely that we would be able to conduct a single arm study, that is 1686 only with response as the endpoint.

And the end of that study again to be determined in discussion with the FDA, we would believe to be, again depending on what that response rate is, the higher the response rate the lower the end, but some number that would be on the order of 150 to as many as 200 patients. That patient population, that study would enroll very, very rapidly. So we believe it is response. In the event that response rate is lower than we would like, this isn't a prediction, it is an answer to your question, and we had to do a head-to-head against chemotherapy, the primary endpoint we think would be progression free survival with a secondary endpoint of overall survival. But that, too, would require a dialogue with the FDA.

Understood. Thank you. I will leave you to take questions to [Marco].

Great.

Thank you. The next question from the line of Peter Lawson with Mizuho Securities USA. Please go ahead, sir.

Patrick, I may have missed this, I have been jumping between calls. For rucaparib there was a slight

I hate to do this, maybe it's our phone. Can you get closer to your mike -- am I getting old?

It is really quiet.

So for rucaparib there was a slight delay from the second half to basically you pushed out to the end of the second half of the Phase II biomarker study of the ARIEL2. What caused that delay?

We had to set a dose and so we couldn't know exactly when we would set a dose. We only just literally now have established the dose and that has to get dropped into protocols. So when those IRB approvals occur based on this dose we will be in a position to initiate that study.

It is not the end of the second half for ARIEL2 just to be clear.

But you've moved it to 4Q?

The first patient into that study will be not entirely sure at this point but it will be either September or October. Right on the cusp of three to four.

Got you. Okay. Thank you. And then the Supreme Court decision around BRCA gene patents upholding the CDNA overturning the isolated gene patents, has that in any way changed your outlook on the use of the companion diagnostic or your partner or the approach there?

No.

And around the clinical evidence surrounding platinum sensitive patients has that changed or in any way invalidated the use of a diagnostic?

No. Andrew, go ahead.

We the one thing that we have learned that is very important in the last few months was the retrospective analysis of Jonathan Letterman's switch maintenance study in high grade serious ovarian cancer with AstraZeneca's PARP inhibitor olaparib. And they did a retrospective analysis of the 265 patients that were in that trial, originally selected just on clinical grounds of being of being platinum sensitive on a repeated basis. But they went back and obtained blood and tissue from the majority of the patients and therefore were able to analyze the data based on whether the patients were germ-line BRCA mutant, somatic BRCA mutant, or BRCA wild type. And they showed two important things which really were consistent with the assumptions we had made to inform our program.

The first observation was that germ-line and somatic BRCA mutant patients had exactly the same benefit from PARP inhibitor therapy and the hazard ratio in the retrospective analysis was 0.18 for the blended group and it really didn't matter whether you were germ-line or somatic. Hence the utility, the tissue BRCA test is that you collect both of those patients and don't rely just on germ-line which misses and leaves out about a third of the patients. The second observation that was really important was that in patients who had wild type BRCA genes, the hazard ratio for PARP inhibitor therapy in that trial was 0.53, whichis obviously a very respectable efficacy metric. And our belief that is that that really comprises two populations of patients.

One group that is probably going to get little benefit from PARP and one group that will get a substantial benefit from PARP, with a hazard ratio of maybe a 0.3 or 0.4 and obviously And obviously our program is aimed at dissecting out those two populations and delivering a clinical pivotal trial that will show how to separate them using a validated companion diagnostic and obviously we believe that that will lead potentially to a very good quality label and will really help physicians and patients understand who should get PARP therapy and who should not get PARP therapy. So there is I think a key insight informed our program really some what unaffected by the Supreme Court position on Myriad.

Got you, thank you. Did you mention incidence rates for the BRCAness?

It's not been defined very robustly because the key question is who defines to PARP inhibitor? There are all kinds of assertions you can in the literature where people will make statements about BRCAness. What we care about is who responds to PARP inhibitor and obviously you need a clinical trial of patients who received PARP inhibitors where you have outcomes and you have genetics and you can correlate the two. That's really the only way to sensibly and convincingly answer your question. And obviously that is precisely the question we are asking and answering in our ARIEL2 biomarker study and the results of that as you know will be used to inform the final analysis, the efficacyanalysis of our ARIEL3 pivotal study.

So what we can tell you is based on the TCGA data the academics that analyzed those patients with high grade serious ovarian cancer believe that 51% of their patients with high grade serious ovarian cancer patients exhibited BRCA or BRCAness, if you like. The term they would use in the paper was homologous recombination deficiency. It's the same thing. Their figure was 51%. That is largely based on in silico analysis, and as I say we don't really know whether that is a robust number for PARP inhibitor sensitivity, whether it is too big or too small or just right. We will find out.

Got you. Thank you so much for the color.

Sure.

Thank you. The next question is from Cory Kasimov from JPMorgan. Please go ahead.

This is Whitney on for Cory this morning. Can you hear me okay?

Yes

Excellent. First question I'm wondering for the 1686 dose is the 500 mg BID equivalent to the 900 mg BID capsule or is that a step-up in dose?

It is a full analysis from looking at exposures in a number of things but it was informed by both the 900 milligram dose but also by the fact that we cleared 900 milligram BID and could have gone to 1350 BID for the free base but you chose not to. It is a hybrid.

Okay. Okay. And then I know he you haven't said which one you think will emerge as the DLT but can you talk about some of the things you are starting to see that might be candidates?

No.,

No. Okay.

I'm not going to speculate on what could emerge. I know something will but you it is just -- it really is too early to know what it will be.

Okay. And then last question. Willyou guys wait to see data from the new formulation before really forming your registrational plan or would you feel comfortable making those decisions based on the capsule formulation data?

Depending on what we see what the capsule formulation at 900 mgs BID that could provide a lot of input in our analysis and our decision making as a relates to the registration.

Thanks for taking the questions.

Thank you. (Operator Instructions). Our next question comes from the line of Marco Kozul of Leerink Swann. Please go ahead.

Good morning and congrats on your progress. My friend Ravi already took all my good questions so I will start with this one. Give us your views on heterogeneous mutations that can drive progression in the refractory non-small cell setting. And more specifically can a patient have T790M positive mutation status but still have another mutation that's driving progression of their disease? And that might show tumor regression even if the drug is a nonT790M specific drug that might work through another pathway and if this does occur any you sense of how frequent or infrequent this could be?

Andrew?

A good question, Marco and in essence we don't have an answer and no one has an answer to the issue of degree of heterogeneity and drivers of heterogeneity. Because to answer the question requires multiple site biopsies in a patient with acquired resistance. It is hard enough to be honest to get a single site biopsy in a lung cancer patient with acquired resistance. Nobody yet has done it to do multiple site. I think that will happen over time and I think the growing utility of blood-based molecular testing will actually help inform the answer to your question where we will start to see if a patient does carry multiple potential drivers of acquired resistance that can be measured and monitored in the blood, I think that will give us some indirect answers although it won't be specific to a lesion that is visibly growing or visibly shrinking or visibly static which is what we really need in order to answer your question well.

I think operationally what we will do is treat our patients. If and when they progress we will try to get biopsies, that is obviously written in our protocols. Those will then be analyzed at the molecular levels. We don't know what the drivers of resistance -- acquired resistance to 1686 will be in humans yet although we hope we will be presenting some data at a scientific meeting later this year reflecting some early in vitro work we have done. But we will collect biopsies from patients, analyze them; we will need to analyze them quite broadly because we don't know what to expect so we have to look -- cast a pretty wide net and see what we see. And that will inform the way we analyze other patients either in their tissue or in their blood. And slowly build a data set that will start to tell us about drivers of resistance and heterogeneity resistance as well.

Terrific, I appreciate that response. I have a few more. Is there any pattern emerging in terms of speed, magnitude and duration of patient responses to 1686? The drives [are] supports the hypothesis that you're clearly shutting down conclusively specific an important pathway, at least for the T790 in patients?

It is too early as to part one of your question to respond to that. We don't have a large enough end yet to respond to that. I think that we have conclusively shown, and to the satisfaction of the clinical community, that be shutting down T790M as our drug does we are shutting down tumor growth. And in fact through all of the evidence presented at ASCO it has become evident that T790M is a driver mutation and 1686 shuts it down when delivered at a high enough dose.

Great. A couple on a potential 1686 follow-on compound. Can you discuss what you believe are some of the most likely 1686 escape or resistance mechanisms?

No. (laughter)You knew I was going to say no, Marco.

Are you still on track to announce a potential candidate by year end?

A potential candidate?

A follow-on candidate to 1686, yes.

We have never intended to announce a follow-on candidate to 1686. We publicly said that we hope to have a candidate identified against cKIT in our collaboration with Array, but we've never talked about a follow-on to 1686. Andrew stated earlier that we may say by the end of this year or early next year what we believe in vitro experiments have shown us to be the resistance mechanism to 1686 but nothing about a follow-on candidate.

Sense you mentioned cKIT are your efforts there primarily focused on developing a target that can overcome the D816V mutations? And can you discuss what other drugs to date have been ineffective here and possibly what overcoming this resistance would imply? But advancing a potential candidate up the treatment paradigm for GISTs, and potential for treating other activating and loop mutations?

Andrew?

So the goal is to develop an inhibitor of acquired resistance mutations in cKIT which appear to be the dominant, the overwhelming driver of acquired resistance in GIST to all of the currently available therapies which include as you know, imatinib, sunitinib, and now regorafenib. D816V is an important resistance mutant. It is not the only one and therefore we are developing a drug which will inhibit the D816V but will also inhibit some other important resistance mutations and we will be able to disclose more data on that topic over time. It's going to be awhile because we don't yet have a nominated clinical candidate.

Sure. And just looking a little further ahead, beyond the early Phase I studies with this candidate that would be looking at safety can you give us any early preview on how focused subsequent clinical trials and development would be for such a candidate?

It as little early for that yet, Marco. I think we have a lot to learn about the compound first. Let's answer that in a year or so.

Terrific. And just one here on 1686 and front line. When do you think you might be ready to give us your deeper views on what the front line opportunity for 1686 might look like?

Well, the front line opportunity is evident in terms of the market size and the market potential, . If you mean -- are you more specifically asking when do we think we will have data from the expansion cohort?

No, just thinking broadly in terms of the overall market opportunity in terms of characterizing what the front line might represent in addition to refractory T790M.

Just numerically around 30,000 patients every year in the United States are going to get lung cancer that is driven by activating mutations of EGFR so the annual incidence that we would be directing that drug against is around 30,000 in the United States. You are aware that today probably 60% of patients or so, 64% is the number that has been used most widely, are actually tested for those mutations of EGFR. There is still some effort to go in educating the clinical community particularly in the community setting about the benefits of testing for EGFR and directing an appropriate therapy.

The good news is for us is that effort is underway aggressively now by both Boehringer for afatinib, and by, or will be shortly, and by Roche Genentech Tarceva, both of which have recently received first line labels. We anticipate that the testing will grow and that by the time we would be in a position to complete a head-to-head against one of those compounds hopefully with a successful outcome that we would be closer and closer to that 30,000 in available patients annually. The numbers are similar in Europe in terms of the percentage of the population because it is a larger population that is a larger number and as you are all well aware I think in Asians unlike this 15% of patients with lungs cancer driven by EGFR that number always reported to be 30% to 35% so the Asian opportunity is quite large on a relative basis.

Appreciate that. One quick last one I promise and then I will jump back in queue. Is there any maturing consensus amongst key (inaudible) leaders or your own thoughts in terms of what a minimum PFS benchmark might be for the compound in the front line settings? Thanks.

A good question. that the progression free survival has reported for Tarceva and for afatinb are are on the order of 10 to 11 months. So pretty similar numbers, 10.5, 11.5 or soare the numbers you see when looking at the full complete population of mutations of EGFR. We think we going to have a tolerability advantage that is really meaningful versus both of these compounds. That in itself is valuable but we also know that in oncology what always matters the most and by an order of magnitude is efficacy.

So we think that if we showed in our single arm study of progression free survival of something on the order of 13 to 14 months we would be okay and would actively consider going ahead with the head-to-head study. But I'm not certain that that is enough. I do think that if we got more to 14 or 15 months and certainly that we would be optimistic about the potential for a head-to-head against one of those agents anything above 15 months would be really, really encouraging to us. So that'd the range I would tell you.

If it was 12 months or less our hypothesis I think was wrong and I would be surprised if we would consider doing a head-to-head against one of those compounds. I have been asked about would we run a non inferiority study. I don't think so. Those are hard to run. Not sure what the advantage would be unless we really believed that the tolerability advantage was so profound.

Appreciate you taking the questions. Thank you.

Sure.

Thank you. Sir, we have no more questions in the queue. With this I would like to turn the call back to Ms. Anna Sussman for closing remarks.

Thank you. We thank all of you for your interest in Clovis Oncology today. If you have any follow-up questions please contact me at 303-625-5022. This call can be accessed via a replay of our webcast at our website beginning in about an hour and it will be available for 30 days. We appreciate your interest and time. Thank you and have a good day.

Thank you, ladies and gentlemen for your participation in today's conference call. You may now disconnect. And have a great day. Thank you.