Clovis Oncology Inc (CLVS) 2015 Q3 法說會逐字稿

Good day, ladies and gentlemen, and thank you for standing by. And welcome to the Clovis Oncology third-quarter 2015 earnings conference call.

(Operator Instructions)

Now I would like to welcome our host for today's conference, Ms. Anna Sussman, Senior Director, Investor Relations. Please go ahead.

Thank you, Carmen. Good afternoon, everyone, and welcome to the Clovis Oncology third-quarter 2015 conference call. You should have received the news release announcing our results. If not, it's available on our website at www.clovisoncology.com. As a reminder, this conference call is being recorded and webcast. Remarks may be [accept] live on our webcast during the call and will be available in our archives for the next several weeks.

The agenda for today's call is as follows. Patrick Mahaffy, Clovis's President and CEO, will discuss the highlights of the third quarter and provide an update on our clinical development program. Then Erle Mast, Clovis's Chief Financial Officer, will cover the financial results for the quarter in more detail. Pat will make a few closing remarks and then we'll open the call for Q&A. (Inaudible) Gillian Ivers-Read, our Chief Regulatory Officer will also be available. Steve Hoerter, our Chief Commercial Officer, and Dr. Lindsey Rolfe, our Chief Medical Officer, are traveling and unable to join us today.

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 of 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 assumes no obligation to update or revise any forward-looking statements.

Now I'll turn the call over to Pat Mahaffy.

All right. Thanks, Anna. Welcome, everybody. Thanks for joining us today. 2015 continues to be a very exciting year for us as we prepare for our transition into a commercial biopharmaceutical organization. Our NDA and MAA submission for rociletinib for the treatment of advanced EGFR mutated T790M positive non small cell lung cancer are on file with the US and EU regulatory authorities. We await FDA action by March 30, 2016, based on our PDUFA date. And EMA action is expected in mid 2016.

As you'll hear, we are fully prepared for a launch now in the United States in the event that we receive an approval prior to our PDUFA date. We raised $298 million in an equity offering in July. We are well capitalized as we prepare for the launch of rociletinib in the US and EU, potentially followed by rucaparib toward the end of next year.

We intend to initiate the submission for our NDA filing for rucaparib in the treatment of patients with advanced tissue BRCA positive ovarian cancer during the first quarter of 2016, a date we have moved forward. The breakthrough therapy designation for rucaparib enables a rolling NDA submission which we expect to complete in the second quarter of 2016. We have now completed enrollment of the mutant BRCA population that will serve as the basis of that planned NDA.

Turning now to product updates, we will begin with rociletinib. As I mentioned, our regulatory filings for rociletinib in the US and Europe are under review. Based on priority review status granted by the FDA, we anticipate an action on or prior to March 30, 2016. We expect an action from the European authorities in mid-2016. Qiagen's supplemental PMA filing for our companion diagnostic for T790M positive mutant EGFR non small cell lung cancer is also under review in parallel with our NDA submission.

As we are actively under review by both the EMA and FDA, we will be somewhat circumspect in our discussion of rociletinib today. We will say that our US commercial and medical affairs organizations are fully in place and preparing for potential launch of rociletinib. We had an intense and exuberant launch meeting last week with our entire commercial organization, including about 100 new sales reps, and I am confident this great team is ready to go and well-prepared to launch rociletinib in the US upon a potential US approval. In addition, we are now in the process of building out our EU commercial organization in preparation for a potential late 2016 launch in the EU.

Turning briefly to rociletinib data presented during the third quarter, as many of you know, we provided updates of clinical data at both the World Conference on Lung Cancer and ESMO in September. These included a new set of data in T790M negative patients as well as in T790M positive patients with central nervous system involvement and a preclinical rationale for some of our combination studies. All of these presentations can be found on our website.

Turning now to rociletinib clinical development, we continue to enroll patients in the Phase 2 portion of TIGER-1, our randomized Phase 2/3 global registration study versus erlotinib in newly diagnosed patients. In TIGER-3, our randomized comparative study chemotherapy, in both T790M positive and T790M negative patients with acquired TKI resistance.

TIGER-J, our Phase 2 study in Japanese patients, is expected to begin enrolling patients in Q1 2016. As we have previously discussed, rociletinib's monotherapy activity and tolerability profile demonstrated in clinical studies may make it a compelling option for combination therapies in the treatment of EGFR mutant non small cell lung cancer, which we are actively exploring.

The first two Clovis-sponsored combination studies are underway or about to initiate. The Phase 1/2 study with Novartis MEK inhibitor with trametinib is currently enrolling patients. And the Phase 1/2 study with atezo, Genentech Roche's investigational anti-PDL-1 drug, is expected to initiate this quarter.

Turning out to our PARP inhibitor rucaparib. We continue to view rucaparib as a highly differentiated PARP inhibitor based on the compelling data generated to date in ovarian cancer in two discrete populations of patients: tissue BRCA mutant patients, which includes those with germline and somatic mutations of BRCA, and in patients whose tumors have other DNA repair deficiencies that cause them to behave similarly to tumors with BRCA mutations, and I will refer to those as BRCA-like or those with a BRCA-like signature.

Let's start with a brief summary of the ovarian cancer data presented at ESMO in late September. Data from the ARIEL2 treatment study and study 10, our Phase-1/2 study, demonstrated encouraging activity and safety in women with advanced platinum-sensitive ovarian cancer with tissue BRCA mutations including, of course, germ line and somatic mutations. In addition, these data continue to demonstrate that the application of our proprietary BRCA-like tumor DNA signature to Foundation Medicine's companion diagnostic assay successfully predicts the population of BRCA-like patients that are non germline BRCA or somatic BRCA and may also, however, respond to rucaparib therapy.

Data from the ARIEL2 treatment study in 40 evaluable BRCA mutant patients showed an overall response rate of 75%, a median progression-free survival of just about 13 months, 12.8 months, and a median duration of response of 9.5 months. The ARIEL2 data in 77 evaluable patients with the BRCA-like signature showed an ORR of 36%, a median PFS of 5.7 months and a very encouraging median duration of response of 8.2 months in those responders. The study is ongoing and these data continue to mature.

In addition, data from study 10 showed consistent results in 39 evaluable germline BRCA mutant patients with an overall response rate of 67%, a disease control rate of 87% and a median duration of response of 6.6 months. And further in this very advanced BRCA mutant population, complete responses were observed in 13% of patients in ARIEL2, and in 8% of patients in study 10. Rucaparib is well-tolerated with anemia and fatigue as the only grade 3/4 treatment-related adverse event that occurred in more than 15% of patients in either trial.

These are clearly the highest response rates seen in a meaningfully-sized mutant BRCA ovarian cancer patient population and, thus far, the only evidence of activity in a prospective redefined BRCA-like population for any PARP inhibitor. We believe the activity observed in the mutant BRCA ovarian cancer population is the reason we were granted breakthrough therapy designation by the FDA earlier this year. We are today the only PARP inhibitor approved or in development to have received breakthrough therapy designation.

As you know, earlier this year we expanded ARIEL2 into a 300-patient registration study for the treatment of ovarian cancer patients who have failed at these three prior therapies. I am pleased to announce that we have completed enrollment of the mutant BRCA population we intend to use as the basis of our submission of our new drug application for rucaparib, beginning in the first quarter of 2016.

The breakthrough therapy designation for rucaparib enables a rolling NDA submission for the treatment of advanced ovarian cancer patients with a tissue BRCA mutation, which NDA we intend to complete in the second quarter of 2016. Pending data from the ongoing study, we hope to follow this with a supplemental NDA for advanced ovarian cancer patients with a BRCA-like mutation.

We also continue to expect to complete enrollment in ARIEL3 in early 2016 and to report results from this study in mid 2017. As a reminder, the ARIEL3 study is our Phase 3 registration study comparing the effects of rucaparib versus placebo. The study will evaluate whether rucaparib, given as maintenance therapy in platinum- sensitive, high-grade ovarian cancer patients can extend the period of time for which a response to a prior chemotherapy is maintained. Efficacy will be assessed in a prespecified stepdown manner.

First in tissue mutant BRCA patients and then a larger group of patients with the BRCA-like signature, as defined and validated now in the ARIEL2 study, with or without BRCA mutations, and, finally, in all randomized patients. Further, given the compelling data to date in ovarian cancer combined with anecdotal evidence of activity from our own Phase 1 studies, we are committed to exploring the potential of rucaparib in other solid tumors where BRCA mutations and BRCA-like mutations occur with some frequency, including prostate, breast, and gastroesophageal cancers.

Specifically prostate cancer is the sixth most common cause of cancer death in men worldwide, and there remains considerable unmet need in advanced castrate-resistant disease. Approximately 10% of advanced prostate cancers have BRCA mutations and there is recent evidence confirming that BRCA-mutated prostate tumors are sensitive to PARP inhibitors. This disease represents an important focus of our continuing development of rucaparib.

We are collaborating with the Medical Research Council in the UK to investigate the frequency of the BRCA-like signature in advanced disease and in parallel are planning a sponsored clinical program for the treatment of prostate cancer associated with certain molecular abnormalities, including, of course, BRCA mutations.

Now briefly on lucitanib. Lucitanib is our oral potent inhibitor of the tyrosine kinase activity of FGF, VEGF and PDGF receptors. Lucitanib has previously demonstrated impressive response rates with manageable side effects in heavily pretreated patients with solid tumors. We have two Clovis-sponsored Phase 2 trials underway, including a US Phase 2 study in FGF aberrant patients with advanced breast cancer and the global Phase 2 study in advanced lung cancer patients with FGF receptor aberrations.

We continue to enroll patients in these studies. We'll also begin to explore combination studies in 2016. We plan to provide the first look at the Phase 2 breast cancer data at ASCO 2016.

Before we transition to the financial results, I'd like and I need to make some personal remarks about my colleague, cofounder and best friend Erle Mast. It's with regret that we announced Erle's retirement from Clovis at the end of March 2016. It's been my privilege to work with Erle for the last 14 years, first at Pharmion and now Clovis, and I will miss him a ton.

We are, of course, grateful for his many contributions. Speaking of which, his last contribution to us before he retires is his very generous transition period which allows us the time to find a highly qualified replacement. We are initiating a search for a CFO, and we will ideally bring a new CFO on board in the next few months, and prior to Erle's departure, to make the transition as smooth as possible.

Now Erle, for the first of your last two reports to these investors. Go ahead.

Thanks, Pat, and thanks for your kind words. Certainly being a part of building Clovis Oncology will be a highlight of my career. As I transition my role to the successor next March, I will always look back at my time here with my friends and colleagues with a high degree of fondness and of pride. I appreciate your words.

So now let me turn to our third-quarter financial results. Our net loss attributable to common shareholders was $98.6 million or $2.62 per share for the third quarter of 2015 and it was $233.3 million or $6.62 per share for the first nine months of 2015. That compares to a net loss of $39.6 million and $105.1 million for the comparable periods of 2014.

The increase in our net loss was primarily due to increased investment in research and development activities, and that includes rociletinib commercial launch planning in 2015, as well as the lack of a milestone revenue in 2015 as compared to 2014 when we did have some milestone revenue come in.

Research and development expenses totaled $76.1 million for the third quarter of this year and $193.3 million for the first nine months of 2015. That compares to $35 million and $87.6 million in the comparable periods of 2014. These increases are due to expanded enrollment in the TIGER-X and the TIGER-2 studies for rociletinib. In the ARIEL2 and ARIEL3 studies for rucaparib, as well as the initiation of TIGER-1 and TIGER-3 and launch preparation activities for rociletinib and, of course, higher personnel costs to support all of those activities.

Our general and administrative expenses were $8.3 million for the third quarter of this year and $22.3 million for the first nine months of 2015. And those amounts compare to $5.3 million and $15.9 million for 2014. These year-over-year increases are primarily due to higher share-based compensation expense and personnel costs, increased facility costs and higher professional service fees in 2015.

We had acquired in-process research and development expenses totaling $12 million for both the third quarter and the first nine months of 2015. During this quarter, we made milestone payments to Celgene which totaled $12 million upon acceptance of the NDA and the MAA for rociletinib by each of the FDA and EMA respectively.

Our net cash used in operations for the third quarter of 2015 was $71.7 million and $177.4 million for the first nine months of 2015. Each of those amounts include the $12 million in rociletinib milestone payments that I referred to just a minute ago. We continue to expect that our quarterly cash burn will increase in the fourth quarter of 2015 as, again, enrollment in our clinical studies continue to grow and our launch preparation activities for rociletinib expand. We ended the third quarter with $605.9 million in cash and available for sale investments.

With that, I'll turn the call back over to Pat who will make some closing remarks and we'll open it up for Q&A.

We'll save it. Erle told me earlier here's looking forward to calling in to these presentations in the future, so he'll still be a part of it. Thanks, Erle.

Moving forward we're awaiting what we hope will be an FDA approval for rociletinib in the near term and the subsequent US launch. We are also moving forward with the buildout of our European commercial organization and actively preparing for US regulatory submission for rucaparib beginning now in the first quarter of 2016, just a few months away. What this means, of course, is that within a little more than a year, we could be leveraging our US commercial and medical affairs organizations to support the commercialization in support of both rociletinib and rucaparib in the United States. Certainly an exciting time; certainly represents a lot of work ahead.

I'd like to open the call now to any questions you guys might have.

(Operator Instructions)

Terence Flynn, Goldman Sachs.

Maybe just two for me. First, Pat, can you just update us on your combination strategy for roci, given some of the evolving data out there both for other drugs and also competitor drugs? Have your priorities changed at all here in terms of what you're hoping to see?

And maybe one for Erle, can you just help frame for us the G&A impact as we head into fourth quarter as we think about the ramp there? Thank you.

Terence, I think you're probably referring to the combination studies with immuno-oncology agents. Correct?

Correct, and also Avastin and how that fits into the mix.

Good point. Of course, we're all aware that a competitor drug with a different immuno-oncology agent announced, I guess, a partial hold of a combination study because of a very high incidence of ILD. We are obviously aware of those data. We will take into account those data in the management of our combination trials, but we and our investigators are both very supportive and committed to moving forward with appropriate caution in the combination studies which in one case Keytruda, Merck's PD-1 inhibitor, which is an investigator-sponsored study.

And then the second is our sponsored study with Roche's PD-L1. It is a great question whether these two drugs are going to result with a similar side effect profile as it relates to combinations or not. We are all well aware that these drugs and, frankly, these drugs and each of these drugs' metabolites have different characteristics and result in different side effects. We've talked ad nauseum, for instance, about hyperglycemia, in our case, which doesn't exist for the competitor drug.

What we don't know is whether we are going to see that has a class effect or whether we are going to see it in a much more limited way in our trial and it's why we're going to conduct the trial. I'd also add, Terrence, one last thing. Of course, it's not only that it's a different drug as the TKI. It's also a different drug as the immuno-oncology agent.

In both cases we and our investigators will move forward. I think both are likely to begin in the fourth quarter. One may draw into early in the first quarter. I am well aware that all eyes will be on data here and we will make sure we provide appropriate updates as we move forward with those studies.

I would also add that we will likely initiate at some point, mid next year, an initial combination study with Avastin, based on the very encouraging data that we saw in the combination of Avastin with erlotinib in the frontline study. That's always been high on our list and, in fact, not only is it high on our list but CTEP itself is planning to sponsor a study in combination with Avastin. A lot to come in our combination strategies as they continue to evolve based on emerging data.

Terence, just to respond to your second question, you asked about G&A ramp for Q4. I just want to make sure I'm clear. I'm thinking you're probably referring just to kind of the expense ramp associated with the commercial activities we have ongoing. Is that correct?

That's correct.

So right now, until approval, all those costs get rolled into our R&D line. So I just want to point that out. Once we are approved, then they will transition and we'll create, obviously, an SG&A line.

Let me address that in the context of what we have seen in our R&D expense, what happened in Q3 and how that will impact Q4. The most significant change in Q3, but it only impacted the quarter towards the last, frankly, few weeks, is the hiring of the commercial sales force. Those folks came on in September. Obviously as we get into Q4 you will see the effect of having our commercial organization in place for the entire quarter from a cost perspective.

I think as you've heard us say all along, we clearly wanted to be in a position to be ready to launch this drug during the fourth quarter and so took all the steps we needed to to make sure that that happened.

If you look at some of the quarterly trends on our R&D line, for example, from Q2 to Q3, our R&D spending went from $60 million to $76 million. Now that's a combination of clinical study costs as well as commercial launch activities. I don't know exactly the split in that growth, it was probably pretty equal between the two.

This is a long answer to your question, but I think, really, as we look into Q4, the marketing, the launch prep activities will be constant from Q3 to Q4 with the addition of having our field-based organization in place for the entire quarter. And I think, as you may know, that's about 100 or 110 people. Hopefully that helps at least set the stage of what you'll see in Q4.

Great, thanks, guys.

Tom Schrader from Stifel.

Congratulations. I understand you want to be circumspect on rociletinib, but I'm wondering if you can say anything about the number of patients in the approval package at the dose? Have we seen everything that the FDA is going to see or is TIGER-2, does that have a lot of 500 milligram patients? Can you say anything there?

I'm going to stick to what we said before. We have never disclosed the agreed number of patients at that dose with FDA. It is actively under review. We certainly believe it is a sufficient number based on dialogue with FDA to allow for a review at that dose in our label.

Perfect. On rucaparib, you have this elegant LOH assay. Are you sure at this point that that won't essentially boil down to how well platinum did in earlier lines and that the decision may, in fact, in the endpoint simpler? Do you know already that that is not the case or is that still possible?

I'm going to -- Tom, I want to make sure I understand that question. If I paraphrase you, is your question, isn't it likely that it is platinum sensitive patients that are going to respond to rucaparib even in this BRCA-like population? Or are you saying is the BRCA-like population basically platinum responders?

I'm saying is it the best platinum responders? Is it maybe platinum responders greater than 18 months that aren't BRCA2?

We will continue to evaluate the relationship of platinum responsiveness to both responsiveness to rucaparib than the mutant BRCA population. And now responsiveness to rucaparib in the BRCA-like population.

It's a little early for us to draw any clear conclusions. There may well be a relationship of platinum responsiveness to each of these groups because there is a relationship in DNA damage to the activity of platinum. I don't think we are quite ready to call out exactly how tight that relationship is based on the data we have.

Okay.

You are probably aware that, for instance, in the BRCA population, that when we look by line of therapy, and admittedly this didn't go down to seventh, eighth, and ninth line of therapy that may have been primarily platinum-resistant patients. When we look at platinum responsiveness by line of -- excuse me, rucaparib responsiveness by line of therapy, whether it's one, two or three priors, it looked very, very similar in the data we presented at ASCO.

Perfect. Thank you very much.

Cory Kasimov with JPMorgan.

This is Whitney on for Cory. I wanted to follow up on the SG&A question. Can you remind us what your EU commercial organization will look like as we look towards 2016 spend? Also how will your commercial organization have to change on a potential rucaparib approval?

Sure. Whitney, it's Erle. So for the European organization, we are just starting that out on the -- for the commercial organization. That will be substantially built through 2016, as you are probably aware. There's more of a time lapse between the approval of the drug in the EU and when you can actually launch in respective countries due to price reviews and things like that. You will see this build go continuing -- in Europe go continually through 2016 as that year progresses.

We don't have -- as we bring country general managers in our commercial leadership, which is happening right now, we'll certainly have a much better feel for exactly what that organization will look like. I think when you -- painting in broad strokes, I think it will be similar in size to what we have in the US. Again, it's roughly 100 sales reps across the primary markets in the EU as we do here, as well as some more local country individuals.

We will be able to give more clarity on that, I think, as we get into the first quarter and we have leadership groups in Europe in place. But at least that should give you some idea as to where it's going.

And I'll say, to add to that, I do think the SG&A build in the EU based on people coming on board is going to be second-half weighted because that's when -- that's the earliest reps would come on. They would come on territory by territory as we get closer to reimbursement.

You asked the question about rucaparib. That's, in fact, one of the great advantages that we have with potentially a two-drug portfolio is that we get a tremendous amount of leverage out of the existing organizations in the US and hopefully in the EU. There obviously would always be some extra -- there are now, some extra people in marketing and certain support, but we would intend gladly that the commercial organization, including in particular the sales force, would be fully capable of supporting both products.

Great, thanks.

(Operator Instructions)

Eric Criscuolo, Mizuho Securities.

Can you talk about any of the preliminary discussions that you've had with the health insurers and health plans before the roci launch?

We have had some initial dialogue as any company in our situation would have. We are discussing reimbursement with both government agencies and third-party payers. Because we haven't described to them or to you or to anybody a price, these are relatively high-level discussions. However, based on these discussions -- and, frankly, this has been true of all recently launched oncology drugs, we fully expect rociletinib to be reimbursed by payers before its initial approved indications at the time, or closely thereafter, of its launch.

Okay. Has there been any pushback or do you see anything from potential, I don't know, logjam, if your competitor launches at the same time? Do you think that could influence timing of reimbursement decisions or anything like that?

I do not. I don't think that will have an impact on either our competitor or on us, depending on the timing of each of our potential approvals.

Okay, thanks. And then just talking about your general strategy for the launch and specifically targeting doctors, what types of institutions you are targeting? What types of facilities? And maybe anything you can provide on where they are concentrated and where you think your sales force would be looking at? Can you talk to any details on that?

I don't think I would say anything surprising. We have done quite a bit of territory mapping before we hired the sales force. Sales forces now positioned locally in their territories.

Each of these would likely call on, depending on their territories, some territories, some mix of academic and community centers, but it wouldn't surprise anybody that the majority of these patients, not all of them, but the majority of these patients will be treated in the community setting and we are perfectly prepared to call on both academic and community centers to make physicians aware of the drug following its potential approval.

And lastly on the TIGER-1 data, that initial data that we could see, is that potentially available at ASCO next year

It is.

Great. That is it for me. Thank you.

I am not showing any further questions in the queue. I would like to turn the call back to Ms. Anna Sussman for any final remarks.

Thank you. Thank you, everyone, for your interest in Clovis today. If you have any follow-up questions, please call me at 303-625-5022. This call can be accessed via replay at www.clovisoncology beginning in about an hour and it will be available for 30 days. Thanks for your interest and your time and have a good evening.

Ladies and gentlemen, thank you for participating in today's conference. This concludes the program and you may all disconnect. Have a wonderful day, everyone.