Clovis Oncology Inc (CLVS) 2017 Q2 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Q2 2017 Clovis Oncology Incorporated Earnings Conference Call. (Operator Instructions). I would now like introduce your host for today's conference call, Ms. Anna Sussman. You may begin.

Thanks, Kevin. Good afternoon, everyone. Welcome to the Clovis Oncology Second Quarter 2017 Conference Call. You should have received the news release announcing our financial results. If not, it's available on our website. As a reminder, this conference call is being recorded and webcast. Remarks may be accessed live on our website during the call and will be available in our archive for the next several weeks.

The agenda for today's call is as follows: Pat Mahaffy, Clovis' President and CEO, will discuss the key components of our corporate update provided in today's news release as well as an update on our clinical development programs. Then Dan Muehl, Clovis' Senior Vice President of Finance and Principal Financial and Accounting Officer, will cover the financial results for the quarter in greater detail. Pat will make a few closing remarks and then we'll open the call for Q&A.

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 undertakes no obligation to revise or update any forward-looking statement. Additionally, please note that we will be discussing adjusted net loss, 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 Patrick Mahaffy.

Thanks, Anna. Welcome, everybody. Thanks for joining us today.

I'd like to start with an update on the launch of Rubraca. We were very pleased with our second full quarter of sales for Rubraca, which was approved on December 19, 2016 by the FDA as monotherapy for the treatment of patients with deleterious BRCA mutation associated advanced ovarian cancer who have been treated with 2 or more prior chemotherapies.

We achieved $14.6 million in net sales during the second quarter. Through the second quarter, we have over 750 new patients on therapy and, equally impressive, over 600 unique health care providers who have prescribed Rubraca. The second quarter sales were over double our sales in Q1 and occurred in the face of a competitive launch into an ovarian cancer population at least 4x larger than our current label addresses. While we will be limited to the smaller population of addressable patients until our potential label expansion based on the ARIEL3 date next year, we believe our strong performance to date reflects the general confidence prescribers are gaining with Rubraca. We believe this bodes well for our broader maintenance label that would address this larger population, if approved by the FDA next year. Payer coverage continues to be quite positive. As with other oral oncolytic launches, Rubraca generally requires a prior authorization, and as of June 30, over 96% of new prescriptions have been efficiently processed and filled.

Now I'll review a selection of prescribing and utilization patterns to date. The shift to a majority of community-based prescriptions has occurred and, for the second quarter, 40% of Rubraca prescriptions were from academic institutions while 60% were through community-based practices. We anticipate that the percentage of prescriptions from community-based practices will continue to grow over time. We are also contributing to a general increase in knowledge and interest by prescribers in PARP inhibitors and, more specifically, in Rubraca. While during the first quarter, 20% of our prescribers had not previously utilized a PARP inhibitor, during the second quarter, 40% of our prescribers were first-time prescribers of a PARP inhibitor.

Overall, we're very pleased with the first 2 quarters of the Rubraca launch and the feedback we are receiving from the field. We look forward to providing further updates each quarter on sales as well as our efforts in regulatory progress on label expansion in the United States. This planned label expansion will be based on the results of the ARIEL3 data, which I'll now happily review.

The highlight of the second quarter, of course, is the announcement of the top-line results of the ARIEL3 study in mid-June. I'll review those highlights today, and we look forward to the presentation of the full data set at ESMO in Madrid in early September.

ARIEL3 is a randomized double-blind study comparing the effects of rucaparib against placebo to evaluate whether rucaparib given as maintenance treatment to platinum-sensitive patients can extend the period of time for which the disease is controlled after a partial or complete response to platinum-based chemotherapy. Patients with high-grade serous ovarian cancer who have received 2 or more prior lines of platinum-based chemotherapy were randomized 2-to-1 to receive either rucaparib or placebo, and the primary end point of the study is progression-free survival, or PFS, based on investigator review, with PFS based on blinded independent central review as a key secondary end point.

Enrollment in the trial required a partial or complete response to the most recent platinum-based therapy. Primary efficacy analysis evaluated the following groups in s step-down, nested manner: first, tumor BRCA-mutant, including both germline and somatic mutations; second, all HRD-positive patients, including the BRCA-mutant patients; and finally, all patients enrolled in the trial including biomarker-negative patients.

On June 19, we were pleased to announce that the ARIEL study successfully achieved its primary end point of improved PFS in all three primary efficacy analyses: tumor BRCA-mutant, HRD-positive and the overall intent-to-treat population. ARIEL3 also demonstrated improved PFS by blinded independent central review in each of the tumor BRCA-mutant, HRD-positive and overall intent-to-treat populations. This was a key pre-specified secondary end point in the study and, as such, we will include it in the draft label we submit with our supplemental NDA. To remind you, both investigator and blinded independent assessments of response are included in our current U.S. treatment label.

The exploratory PFS end points were achieved by both investigator assessment and blinded independent central review in the HRD-positive and HRD-negative sub-groups of patients without a BRCA mutation. Also, and we think very important, ARIEL3 patients with residual disease at study entry, who were treated with rucaparib, showed further reduction in tumor burden, including 17% of the evaluable BRCA population who achieved a complete response. We've believe these data demonstrate the potential of rucaparib to improve response beyond their most recent platinum response in some patients and this will be particularly important in the grey zone between treatment and maintenance where many patients complete their platinum-based therapy but retain residual tumor. And importantly, the safety profile of rucaparib observed in ARIEL3 was highly consistent with the U.S. treatment label for rucaparib.

And while we included a summary table of the ARIEL3 results in today's news release, I'll briefly review the data in the intent-to-treat or all-comers population, which includes all 564 patients enrolled in this study. These results will serve as the basis for our supplemental NDA for rucaparib in the maintenance treatment setting in the overall population of women with platinum-sensitive advanced ovarian cancer who have responded to their most recent platinum therapy.

Rucaparib met the primary end point of improved PFS compared with placebo in the intent-to-treat population, which included all enrolled patients. By investigator review, the rucaparib arm showed a highly statistically significant improvement, compared with the placebo arm, in progression-free survival with a hazard ratio of 0.36 and a p-value of less than .0001. The median PFS for all patients treated with rucaparib was 10.8 months versus 5.4 months for those who received placebo. By independent review, the rucaparib arm improved PFS over the placebo arm with a hazard ratio of 0.35 and a p-value of less than .0001. The median PFS for all patients enrolled in ARIEL3 and treated with rucaparib was 13.7 months versus 5.4 months for those who received placebo.

We know there was great anticipation for the ARIEL3 data by the investor community, but it was more important to the clinical community who treat this awful disease every day. We have been overwhelmed by the enthusiasm and excitement with which these results have been embraced, and this enthusiasm drives our effort to seek approval to include these data in our U.S. label and see it approved in Europe as well so that an all-comers population of advanced ovarian cancer patients can have access to this very important drug.

Now I'll provide an update on our planned and ongoing regulatory efforts in the U.S. and the E.U. In the United States, we intend to submit a supplemental NDA based on the ARIEL3 data by the end of October for the second-line and later maintenance treatment indication for all women with platinum-sensitive ovarian cancer who have responded to their most recent platinum therapy. Based on the timing of this submission, we would expect an FDA action in the first half of 2018.

Our European submission for rucaparib for the treatment setting was accepted during the fourth quarter of 2016 and is under review by the EMA for an ovarian cancer treatment indication comparable to our current U.S. label. We anticipate an opinion from the CHMP in late 2017 and, pending a favorable opinion, we would expect a formal approval in early 2018. Upon receipt of a potential approval for the treatment indication, we plan to submit a supplemental application to the EMA for rucaparib in the second-line or later maintenance treatment indication for which we anticipate a potential approval during the third quarter of 2018. Given this timing, we continue to actively build out our European commercial and medical affairs infrastructure. Of course, our regulatory, clinical, safety, quality and supply chain teams are already in place in our Cambridge, U.K. office.

Now I'd like to provide an update on clinical development including greater detail on our broad clinical collaboration with Bristol-Myers Squibb for multiple combination studies of Opdivo and Rubraca announced earlier this week. On Monday, we and Bristol-Myers Squibb, or BMS, announced a broad clinical collaboration agreement to evaluate the combination of their first-in-class immunotherapy, Opdivo, and our PARP inhibitor, Rubraca, in pivotal Phase 3 clinical trials in advanced ovarian cancer and advanced triple-negative breast cancer, as well as a Phase 2 clinical trial in metastatic castration-resistant prostate cancer.

The advanced ovarian cancer study will focus on first-line maintenance treatment and will be sponsored, funded and conducted by Clovis. The Phase 3 study will evaluate Rubraca plus Opdivo; Rubraca, Opdivo and placebo in newly-diagnosed patients with Stage 3-4 high-grade ovarian, fallopian tube or primary peritoneal cancer, who have completed platinum-based chemotherapy.

The advanced triple-negative breast cancer will focus on first-line maintenance treatment and would be sponsored and conducted by BMS with all costs shared equally between BMS and Clovis. The Phase 3 study will evaluate Rubraca plus Opdivo; Rubraca, Opdivo and chemotherapy in patients with Stage 4 or recurrent locally-advanced inoperable triple-negative breast cancer associated with either BRCA mutations or in HRD patients as defined by percentage of genomic damage.

The prostate cancer study will be sponsored, funded and conducted by BMS. The Phase 2 study will evaluate the safety and efficacy of Opdivo in combination with Rubraca in patients with metastatic castration-resistant prostate cancer and will be conducted as an arm of a larger BMS-sponsored study. The Opdivo-Rubraca arm will evaluate patients with deleterious BRCA and ATM mutations as well as HRD, defined as deleterious mutations in other genes involved in HR.

All three studies are expected to begin before the end of this year. Further terms of the agreement were not disclosed, but the overall structure of the collaboration is an excellent example of our development strategy. Where combination therapies may provide better outcomes than rucaparib monotherapy, we seek to establish non-exclusive clinical collaborations with leaders in their class while maintaining 100% ownership of rucaparib, including for all indications. We also seek to share with our partner in the development costs. Otherwise, the costs of the multiple planned Phase 3 trials would be difficult, if not impossible, to finance and manage on our own. We believe that this strategy provides the greatest opportunity to achieve meaningful clinical results for patients with the best potential outcomes for shareholders.

Obviously, the most exciting potential combination being considered in oncology today is the combination of the PARP inhibitor with the PD-1 or PDL-1 inhibitor and there is strong scientific rationale to support this excitement. There is a significant need for new, effective treatment regimens for patients who have advanced cancer. An overlap in immunobiology supports the potential for a synergy of PARP inhibition and PD-1 blockade. Pre-clinical evidence has demonstrated that PARP inhibition can trigger inflammation, cell death and increased T-cell infiltration within tumors, potentially augmenting the effects of PD-1 inhibition. In addition, the combination of PD-1 or PDL-1 blockade and PARP inhibition extends survival in tumor-bearing animal models compared with either modality alone.

Obviously, we are extremely enthusiastic about our clinical collaboration with BMS. It provides us the opportunity to partner with the leader in immuno-oncology and, equally important, a company with a shared strategic vision of how Rubraca and Opdivo should be developed in multiple indications in a timely manner to hopefully create the greatest benefit for patients. Further, these trials propel us into a leader (inaudible) in the development of a PARP inhibitor with an I-O agent in earlier-line triple-negative breast cancer patients, expand our leading position in the development of a PARP inhibitor to treat castration-resistant prostate cancer and allow us to lead in the development of a PARP inhibitor in combination with a PD-1 in maintenance treatment in earlier-line ovarian cancer. And we do all of this while maintaining rights for all indications and geographies for rucaparib. In fact, we are the only developer of an approved PARP inhibitor who has maintained global rights to its drug.

Turning now to the rest of rucaparib development program, I'll start with our company-sponsored studies included ARIEL4, our confirmatory study in the ovarian cancer treatment setting, which is open for enrollment. ARIEL4 is a Phase 3 multi-center randomized confirmatory study of rucaparib versus chemotherapy in relapsed ovarian cancer patients with BRCA mutation ovarian cancer, whose tumors have progressed after 2 or more prior lines of therapy. The primary end point of the study is PFS. We anticipate data from this study in 2022.

As we had mentioned previously, after ovarian cancer, prostate cancer is our next high priority of focus. Prostate cancer is a high-priority indication for us, as a meaningful number of advanced prostate cancer tumors harbor mutations of BRCA and other genes that may be sensitive to rucaparib. There are two Clovis-sponsored prostate cancer trials that are actively enrolling patients.

The first Clovis-sponsored prostate trial is TRITON2, our Phase 2 single-arm study inclusive of patients who have a germline or somatic BRCA or ATM mutation or other deleterious mutations in HR repair genes, whose tumors have progressed after receiving one line of taxane-based chemotherapy and one or two lines of androgen receptor targeted therapy in the castrate-resistant setting. The planned primary end points are radiological overall response rate in patients with measurable disease and PSA response in patients without measurable disease.

Our second Clovis-sponsored study is TRITON3, a Phase 3 comparative study that includes patients who have a tumor germline or somatic BRCA or ATM mutation, who have progressed on AR targeted therapy and not yet received chemotherapy in the castration-resistant setting. The study will compare rucaparib to physicians' choice of AR targeted therapy or chemotherapy. The planned primary end point is radiologic progression-free survival.

In addition to the Clovis-sponsored prostate cancer studies, we are working in collaboration with the Medical Research Council in the U.K. to study rucaparib, in what is known as the STRAT-STAMPEDE study, in newly-diagnosed patients with castration-sensitive high-risk or metastatic disease associated with mutations in tumor BRCA or other HR genes. The biomarker pilot portion of this cooperative group study is expected to be in later this year.

In addition to STRAT-STAMPEDE, there are 21 investigator-initiated clinical studies of rucaparib in 11 different tumor types, either as monotherapy or in combination. Some of these studies are actively enrolling patients. Others are planned to begin in late 2017 and early 2018. We are very pleased with the enthusiasm of the clinical community to explore rucaparib in investigator-sponsored studies and look forward to gaining any insight they may provide for further rucaparib development.

And finally, turning to additional collaborator-sponsored trials, a Phase 1b study in collaboration with Genentech, a member of the Roche Group, to evaluate a novel combination therapy of their cancer immuno-therapy, TECENTRIQ, and rucaparib for the treatment of gynecological cancers with a focus on ovarian cancer is underway and continues to enroll patients. This study, sponsored by Genentech Roche, is initially a Phase 1b study to determine the dose, which we then expect to expand to explore activity in select patient cohorts.

Now I'll turn the call over to Dan to discuss second quarter financial results.

Thanks, Patrick, and good afternoon, everyone. Our second quarter 2017 financial results are included in this afternoon's press release. I'll review the highlights of our financial results and provide some additional commentary.

Net product revenue was $14.6 million for the second quarter of 2017 and $21.6 million for the first 6 months of 2017. We ended the second quarter with $671.5 million in cash, cash equivalents and available-for-sale securities, including net proceeds of $324.9 million from an offering of 3.92 million shares of common stock in June 2017. Cash used in operating activities was $69.1 million for the second quarter of 2017 and $149.5 million for the first half of 2017. This compares with $68 million and $151.7 million for the first quarter and first half of 2016.

We reported a net loss of $175.4 million or $3.88 per share for the second quarter of 2017 and $233.8 million or a net loss of $5.24 per share for the first half of 2017. This compares to $129.3 million or $3.30 per share and $212.7 million or $5.54 per share for the comparable periods in 2016. The net loss for the quarter and 6 months ended June 30, 2017 included a charge of $117 million related to our legal settlement. The net loss for the quarter and 6 months ended June 30, 2016 included a charge of $104.5 million for the impairment of an intangible asset, a gain of $25.5 million for a reduction in fair value of contingent purchase consideration and $29.2 million non-cash tax benefit related to lucitanib product rights recorded in 2013 in connection with the company's acquisition of Ethical Oncology Science SPA.

The adjusted net loss excluding these items was $58.4 million or $1.29 per share for the second quarter and $116.8 million and $2.62 per share for the first 6 months ended 2017, and $79.4 million or $2.07 per share for the second quarter of 2016 and $162.8 million or $4.24 per share for the 6 months ended 2016. Net loss for the second quarter of 2017 included share-based compensation of $10.7 million and $19.6 million the first half of 2017 compared to $9.5 million and $20.5 million for the comparable periods of 2016.

Our second quarter 2017 R&D expenses totaled $33.1 million and $65.6 million for the first half of 2017. This compares to $67.7 million and $142.3 million for the comparable periods in 2016. The decrease year over year is primarily due to lower spending on rucaparib and rociletinib development programs and classifying as selling, general and administrative certain expenses related to the commercialization of Rubraca that had been classified as research and development prior to FDA approval.

Selling, general and administrative expenses totaled $36.1 million for the second quarter and $65.4 million for the first half of 2017. This compares to $9.6 million and $19.4 million for the comparable periods in 2016. The increase year over year is primarily due to classifying as selling, general and administrative expenses related to the commercialization of Rubraca that had been classified as research and development prior to FDA approval. Operating expenses for the second quarter of 2017 included share-based compensation of $10.7 million and $19.6 million for the first half of 2017 compared to $9.5 million and $20.5 million for the comparable periods of 2016.

Now I'll provide some further color on Rubraca from a finance perspective. We distribute our product principally through a number of specialty distributor and specialty pharmacy providers. These customers subsequently resell our products to patients and health care providers. Separately, we have arrangements with certain payers and other third parties that provide for government-mandated and privately-negotiated rebates, charge-backs and discounts.

As noted previously, the net product revenue was $14.6 million for the quarter. Revenue was recorded net of estimated rebates, charge-backs, discounts and other deductions, as well as estimated product returns, known as gross-to-net, GTN, adjustments, which totaled approximately 8% of gross revenue for the quarter. As revenues rise, the gross-to-net adjustments are expected to remain in the high-single digits as a percentage of gross revenue as the year progresses, assuming that the distribution and payer mix remain consistent. We only recognize revenue on product once the product is resold to the patient or health care provider by the specialty distributor or specialty pharmacy provider. Our distribution mix for the second quarter was approximately 73% specialty pharmacy and approximately 27% specialty distributor, consistent with our expectations, and our payer mix was approximately 62% commercial, 30% Medicare and 8% Medicaid and other, also consistent with our expectations.

It should be noted that we also had prescriptions for and distributed an additional 19% of supply through free drug distributed to payer assistance plan patients. This is primarily due to a lack of foundation funding for copays for Medicare patients. We understand that this experience is consistent with that of other manufacturers of oral oncolytics and we expect this situation to continue. To be clear, had we been paid for this supply, our revenues would have been approximately $5 million higher through the end of June year to date.

Cost of sales for the quarter ended June 30, 2017 was $3.1 million or approximately 21% of net revenue and consisted of costs associated with the sale of Rubraca, mainly freight, royalties and amortization of capitalized acquired intangible license right and milestone payments related to Rubraca. Based on our policy to expense costs associated with the manufacture of our products prior to regulatory approval, certain of the costs of Rubraca recognized as revenue during the year ended December 31, 2016 were expensed prior to the December 19, 2016 FDA approval and therefore are not included in cost of sales during the current period. We expect cost of sales to remain generally consistent in relation to product revenues as we deplete these inventories and amortize the capitalized acquired intangible license rights and milestone payments related to Rubraca. We expect to use the remaining pre-commercialization inventory for product sales in the third quarter of 2017.

With the FDA approval of Rubraca, all sales and marketing expenses associated with Rubraca are included in selling, general and administrative expenses and no longer in R&D. This will have the impact of lowering R&D expenses, on a comparable basis, from 2016 to 2017. Clinical trial expenses will shift in composition in 2017 as well with the completion of all rociletinib trials and the winding down of ARIEL2, ARIEL3 and Study 10 for rucaparib. The ongoing TRITON2, TRITON3, ARIEL4 and other company-sponsored and investigator-initiated trials Pat mentioned earlier will begin to add to higher levels of spending as 2017 progresses.

Now I'll turn the call back to Patrick for some closing remarks. Then we'll open it up for Q&A.

Thanks, Dan. It's a really exciting time at Clovis with several meaningful activities for Rubraca underway. Our initial launch of Rubraca is proceeding well. Our supplemental NDA for an all-comers population in the platinum-sensitive second-line and later maintenance treatment indication based on ARIEL3 data will be filed by the end of October, and anticipated CHMP opinion late this year followed by a potential E.U. approval early next year in the treatment setting followed in the very near term by a supplemental filing for a broad maintenance treatment indication, and our collaboration with Bristol-Myers Squibb now underway with 2 Phase 3 studies and 1 Phase 2 study evaluating rucaparib and Opdivo in combination to commence before year-end in ovarian, triple-negative breast and advanced prostate cancers. This combination could potentially provide a foundational therapy in these and other tumor types. And last, but not at all least, the oral presentation of the full ARIEL3 data set at ESMO in Madrid on Friday afternoon, September 8. We plan to host an investor/analyst event on Saturday evening, September 9, and we'll provide details as we get closer to the meeting.

With that, I'll be happy to answer any questions you may have.

(Operator Instructions). Our first question comes from Tom Shrader from Stifel.

Congratulations on the launch. I'm kind of -- the questions are all about cost saving now because you have so much activity going on. Do you think ARIEL4, do you still need it? Is it still required? It's still enrolling. What does that trial give you now, given ARIEL3 has already confirmed?

Yes. ARIEL3 will serve as a -- will almost certainly serve as the confirmatory trial in the United States. We do believe ARIEL4 may still be required to serve as a confirmatory trial in the E.U. so we are continuing to enroll that trial. As noted, we don't expect data until 2022. I think that should reflect for you what we perceive to be enrollment timelines.

And then, I'm not sure you can comment here, but I would think we were -- at least I was surprised how you got pounded for that BMS deal. Do you have a ballpark number on how much money you saved from that deal, just to give people a sense of the motivation?

Well, first of all, I just want to clarify because I know you didn't mean it this way. But we all know that we didn't get pounded for the BMS deal. I think people understand just how important that is. We got pounded for something else, which is we're still alive. And so it's life. It's life.

I think you could imagine that, for instance, if we had just had to buy commercial drug alone for, for instance, the ovarian maintenance study, that drug could have cost us $60 million to $70 million. So that alone is dramatic. If you think about a Phase 3 study costing, on average, somewhere in the neighborhood of $100,000 per patient and you think that large Phase 3 studies are going to be between 600 and 900 patients, 800 patients -- I mean I'm just giving you a range of what Phase 3 trials normally enroll -- we actually get the benefit of a committed partner, who is helping pay the way for these trials.

And I think what's really important is there is an absolute belief on the part of clinical investigators in multiple tumor types, including beyond these 3 described in the agreement we announced Monday, that a combination with a PD-1 and a PARP inhibitor, in our case, particularly rucaparib, has the potential to be meaningful additions, maybe even foundational in the treatment of those indications. The ability to interact with a partner, who can effectively extend our reach on almost like a 2-to-1 basis, meaning that we're paying half-ish of a broad program as opposed to all of it, is, in my view, an incredible benefit for us. It's a great opportunity for patients. It's really important for shareholders. And we've done it, all the while maintaining 100% global rights to our drug.

And just one quick detail. What do you get in the ovarian trial? Because you're responsible for that one, correct? Do you just get free drug?

Well, I think you need to see this in the context of an agreement to look at 3 different tumor types, 2 of which are trials they're sponsoring, 1 of which we're sponsoring. So I think in the context of all of this, you need to see this as a pretty meaningful commitment by each of Clovis and Bristol-Myers Squibb to explore the opportunity for this very important combination.

Our next question comes from Peter Lawson with SunTrust Robinson Humphreys.

I wondered if you would just give us indication of what percentage of scripts are kind of off label?

Yes, I think what we can say is that we're pretty confident that approximately 9% of our scripts are in patients with other tumor types. I don't know this for sure, but I am highly confident that each of those would be in another tumor type, but where the tumor harbors a BRCA mutation.

Congrats on the PD-1 deal. What other combos are you thinking and what other cancer types are you thinking for the path I-O? Because I assume there are other deals you could do in space.

Well, in terms of other combinations, we haven't been -- obviously, we have the MITO-25 study in Italy that is in a front-line maintenance study looking at rucaparib plus bevacizumab. So that obviously is an important possible combination. We are looking also at combining with other kinase inhibitors and we'll probably be discussing that over the course of the next several quarters.

Other tumor types where we are excited about the potential for a combination with a PD-1 or PDL-1 in combination with Rubraca are -- well, I'll give you our number 1 and 2 priorities are lung and bladder cancer. But clearly we have seen interest expressed in tumor types often addressing somewhat smaller populations beyond those 2.

And then just maybe a follow-up just around the R&D comments. How should we think about R&D for the rest of year and SG&A?

R&D expenses will start to tick up as we go into Q3 and into Q4. As I indicated, we have a wind-down of the ARIEL2, ARIEL3, Study 10 so those will continue to reduce as the TRITON study and ARIEL4 start to pick up. So that will start to lead to what we believe is an increase in Q3 and Q4 over Q2. And from a G&A point of view, it will increase somewhat, but not at a very high rate.

Our next question comes from Michael Schmidt with Leerink Partners.

Congrats on a good second quarter. I was wondering, Patrick, if you could speak about some more about how BRCA is being used right now in ovarian cancer? And what are you seeing in the marketplace, specifically with regards to patients choosing maintenance versus treatment and/or whether BRCA status is influencing that decision?

I think I can say and I think you need to assume that the vast, vast, vast majority of our scripts are on label and they're going to be within somatic or germline mutated patients who've had 2 prior chemotherapies. The vast majority of those patients are going to be -- have had 2 or more prior lines of chemotherapy.

We do not believe we are getting any meaningful amount of use now, we wouldn't anticipate that until it's labeled, in this 4x larger population than we address with our present label, which is limited, of course, to BRCA and germline mutated patients. So if a question may be, are we getting biomarker-negative or even HRD patients, I don't believe we are. And obviously we're not allowed to promote to that. Yes, I think that's our use patterns right now.

And a question around potential combination studies. We've heard recently from KLR that, obviously beyond PD-1 inhibitors, that Avastin might be an agent that has a particularly good rationale to be combined with a PARP inhibitor. And I was wondering if you had any plans to evaluate that beyond the Italian investigator-sponsored study in the near term, in ovarian cancer?

We've definitely had interest expressed to us and it's something we're actively considering.

Our next question comes from Tazeen Ahmad with Bank of America.

Pat, first one is you said that you could have formal EMA approval in the third quarter of 2018, but that you're already starting to build out your infrastructure. How big of an organization do you foresee needing in Europe in particular? And also as we look ahead to try to get our models together, what do you think the price difference could be between U.S. and E.U. for Rubraca?

Yes. So in terms of organization, I'd say that by the end of this year -- so I'm going to just limit it to commercial; I'm not going to talk about the existing organization we have in place -- I would imagine we'd have 20 or 25 people onboard. I'd say, I guess, commercial and non-commercial, but related to it, med affairs.

By the end of 2018, I would imagine, depending on reimbursement, we would have somewhere in the neighborhood of 100 employees. It could be slightly higher depending on the timing of reimbursement in larger markets.

The one thing that's important, though, as you build that model, is to scale the addition of sales reps to achievement of reimbursement. So we will not bring onboard a large commercial organization, other than general managers, maybe a sales manager, marketing managers, in each of the primary territories, until we have achieved not just the approval, but reimbursement in the primary territories. So you won't see a big bolus of expense in anticipation of revenues 2, 3, 4 quarters later. They should be relatively closely tied to each other.

As to the pricing in Europe, I think you need to assume that the pricing is going to be consistent with other newly-priced oncolytics and it's going to range by country. But that range is somewhere between EUR4,000 to EUR4,500 to, on the high end, around EUR6,000 a month. So that's a realistic range for present E.U. reimbursement.

And then on our sNDA timeline, what additional work needs to be done? Because you obviously have the full data in-house so would you realistically need until the end of October to complete your filing?

If you'd like to join me and meet with my regulatory crew just after this call, we can berate them together. I'm teasing. It does take a while to make sure you get all the facts right, and these submissions are enormous, as you know, particularly the clinical study report. And so I think that 4 months from announcement of data, which is when we saw the data, to an NDA submission is certainly on the speedier side in our industry. So I think that's a pretty realistic timeframe.

And then the last question is with your partnership with Bristol, you're highlighting, among other things, this metastatic castration-resistant prostate cancer study that you're doing. You're obviously running the TRITON studies. We've got plenty of data at this point in ovarian, some data in breast from you and other PARP companies. What's your view about how effective, in theory, PARPs could be in treating prostate? And, to that extent, can you describe what you think the market opportunity could be? So several papers we've read, for example, have cited that approximately 20% of prostate cancer patients have BRCA or other homologous recombination deficiency mutations. Are you finding the same type of information?

Yes, I'd say that there are, in the United States, 30,000 to 35,000 cases a year of castrate-resistant prostate cancer and, of that, 20% to 25% we think -- so, related to your number -- are going to be either ATM or BRCA mutated, somatic and germline, both. So it's a meaningful and important population and they don't have great treatment options as they become castrate-resistant.

There is the de Bono publication in the New England Journal for olaparib that shows encouraging results for single-agent olaparib in treatment of advanced patients with both BRCA and ATM mutations. And that was published in December of '15. We have a poster, again for olaparib in combination with their derva PDL-1 in later line patients. It was a small number of patients, 10 or 11 patients, but the responses were really impressive. And it appeared to be independent of BRCA status. So that was encouraging to the community.

We ourselves have, from the Phase 1 and then, more recently, from some compassionate use experience, admittedly anecdotal evidence, not a data set, but that every patient treated has had a real benefit. In fact, I got a beautiful letter from one such patient, who titled the subject line The Comeback Kid. And I want to just say again I know this an n of 1, but this was a gentleman who had been through multiple rounds of therapy. He was on oxygen. He was in a wheelchair, performance status 2, maybe almost performance status 3, and his next stop was going to be hospice until we made rucaparib available to him through a physician that we know and like well. In fact, he's now a participant in each of TRITON2 and TRITON3. A month or it might have been 6 weeks after he started therapy, this guy walked into the clinic. He was now a performance status 0. He was off oxygen. His PSA went from something like 400 to 70. And he had a duration on therapy of about 12 months. It was a great story.

And so we have an enthusiastic investigator community. We certainly know that as go BRCA so goes Rubraca. And I believe that this is an obvious choice for us, given the data set that exists.

Our next question comes from Alethia Young with Credit Suisse.

This is Ellie on for Alethia. In terms of Rubraca trends, is there any visibility that you can provide us on if patients are switching from other PARP inhibitors? And also can you comment on any trends you are seeing around dose reductions and adherence?

Yes. So I don't have an update. I haven't asked recently about patients who may have switched from another PARP inhibitor to ours. In the early period of the launch, and I don't have numbers, but I was aware of some patients who had switched from olaparib, and I think it was driven as much as anything by pill burden. That will change when their tablet is approved, presumably in the very near future. But we did have some switches that occurred, again, I think primarily because of pill burden.

In terms of dose reductions, again, our average time to refill is 31 days for patients who refill. And it was 29 when we reported this in the first quarter. I'd argue those are pretty much the same number. And it's also true that 94% of dispensed volume in the second quarter are still of our 300 milligram tablets. So I don't think we're seeing evidence either of a significant amount of patients changing to the 250 milligram or 200 milligram tablets, not yet at least. And further, given the time to refills, while I'm sure there are some patients who are taking 3 tablets a day instead of 4 or something along those lines, the refill data suggest that is not a very large number of patients at all.

And then just like taking a step back, I guess, can you give us a little bit more detail around which indications you're most excited about for PARPs, I guess in terms of both market potential as well as the underlying biology of DNA repair? I think you mentioned bladder and lung. But I guess can you tell us a little bit more about your thinking around the various indications?

I mentioned bladder and lung, not because they were my favorite, although I think they're highly meaningful opportunities for the combination. I mentioned that in reaction to what else might you want to do. I think that the selected indications of front-line ovarian maintenance, front-line triple-negative breast cancer maintenance and, obviously, our commitment to prostate now potentially in a broader population with Opdivo, are all really meaningful opportunities for this combination. And so I won't say any one of them is my favorite. We're equally enthusiastic about the potential in all 3.

Our next question comes from Cory Kasimov with JPMorgan.

Shawn Fu on for Cory. Congratulations of the quarter and all the progress you guys have been making. So my questions are around the upcoming combo trials, if I may. So first, you alluded briefly to this, but wondering if you could expand on the mechanistic rationale behind combining a PD-1 and Rubraca. And how has this increased immunogenicity secondary to cell killing different from what would be produced from, say, the combination of standard chemotherapy and a PD-1?

Lindsey? I mean I did address that in the script, but I don't want to just repeat myself. Lindsey, anything you would say to that?

Sure. Thanks for the question. So I mean the way I see it, there are 3 separate rationales to suggest combining PD-1 and rucaparib are attractive. I mean the first is the overlap in tumor environment that confirms sensitivity to PARP inhibitor or a PD-1 inhibitor. And by that, I mean, and we know that tumors with high levels of genomic damage are sensitive to PARP inhibitors and we know that tumors with high mutational burden are sensitive to PD-1 or PDL-1 inhibitors. And we know that there's high overlap between those 2 features. So that suggests that the agents will combine well.

And we've got strong in vivo animal data that suggests we see better activity when rucaparib is combined with a PD-1 or PDL-1 inhibitor compared with when either agent is given alone.

And then, as you mention, we have this third element of STING pathway activation. We know that PARP inhibition increases the immune response to a tumor, probably by activating the STING path, or at least partly by that. And so that potentially optimizes the environment by making it more immunogenic for PD-1 inhibition.

Now, you asked whether that was better than immune activation by a cytotoxic chemotherapy. I think it's very hard to say, yes, definitely PARP is the way to go. But when you consider that there are many different rationales for combining the 2, I would select PARP as the agent of choice.

And then my second question is in regards to these multi-arm trials that are coming up. How is the FDA kind of viewing the primary end point on each trial? So whether it be the hazard ratio between the combination arm and placebo or for the combination arm versus the monotherapies? And I guess to rephrase my question, in the event that there's a statistically significant difference between placebo and Rubraca and combo and placebo, but there isn't a statistic difference between the Rubraca monotherapy arm and the combo arm, then what happens?

Lindsey?

So these trials, we're in planning phases at the moment and we haven't been to FDA with the designs of any of them. That's important to say. But looking into the future, although PARP inhibitors are not yet proven effective or approved in front-line maintenance, it's possible that that will become standard of care in the future. So we're making sure that the studies are large enough and powered to detect a difference between the combination and rucaparib monotherapy rather than just going for combination versus placebo. So we are designing them to make them as future-proof as we can based on what we expect might happen.

Kevin, we have time for one more question, please.

Our last question comes from Andrew Berens with Morgan Stanley.

Congrats on a very strong launch even with a competitor temporarily with a broader and earlier label than you. I just wanted to get a sense, I guess. Are you seeing doctors treat beyond progression? A lot of us have built our models off of the clinical trial data, but in the real world are the patients being taken off the drug when they progress?

That is an important question. I have heard anecdotes of that. As you know, it is rare when one progresses on rucaparib, and this perhaps true of all PARP inhibitors, in a sort of explosive way. And I do know of cases where a patient has stayed on therapy when they may have formally progressed and been given radiation to zap a new lesion or just watched for a period of time, even with modest progression.

I think it's also important to note that progression is different in the real world than it is in a clinical trial. It tends to be not driven by -- it can be driven by scans or confirmed by scans, but a lot of it is going to be symptomatic. And it will be those patients that a physician might say, "Look, you're not really benefitting from this and we have to try something else." So while in the clinical context we did see many centers or many physicians who, at the time, of formally calling a progression under a RECIST review would keep them on, I think it's a slightly different situation where they may have already been treating them beyond when a scan would have shown something. It's when symptoms really emerge that they say, "Now we have to try something else." Does that make sense, Andy?

Right. Yes, that does. That does make sense. And then if I could I'd like to, I guess, ask the white elephant question. We have another competitor that has an action date coming and I just would like to get your thoughts maybe a year from now what you see the competitive dynamic looking like in the ovarian cancer market with regards to the labels that you will get, AstraZeneca may get, and how you think that's going to play out commercially.

Well, I have neither a crystal ball or my Magic 8 Ball in front of me so this is not going to be a perfect answer, but I'll do my best to kind of riff on what I think.

We are prepared for that company and that drug to receive an all-comers label. That doesn't mean that I think that that's exactly right. It doesn't matter what I think. But we are prepared for that company to, like us and like TESARO, to have an all-comers label, and believe that we need to be prepared for that possibility. And so in a year, less obviously, but in a year when all 3 of these drugs have likely been approved with an all-comers label, physicians will continue to make their choices based on label and data and from their own experience in terms of tolerability and benefit that they have seen in the clinical trial that they themselves have conducted; meaning they've treated 2 or 3 or 4 patients with these drugs.

I think by label, and you heard our numbers at the median and you know our hazard ratios, in an all-comers population we will have a very high difference at the median, and I would say that assuming we get labeled as our data suggests, we will have the highest difference at the median. These are not comparative claims I'm making. These are different trials. But for a community oncologist, who doesn't have a lot of time to do detailed analyses, they're going to have to look at the data in the label and our label will be very strong.

I do think that competitor you mentioned could come into the market with an all-comers label, but the data from Study 19 presumably has to be the basis of that label, and that label will therefore show, as Study 19 did, a difference of 3 months at the median in all-comers, approximately 8 months versus 5. I do think that that will be compared to what is perceived to be the all-comers label for TESARO, which is 9.4 months versus 4. That's sort of unfair because it doesn't include the germline patients, but that's what it looks like in the label. If they're able to discuss with physicians what their all-comes number is, it's 11 months. That's in the FDA review. It's not in their label, but it's in the FDA review. Our number compares, by both physician and certainly by independent, favorably.

Further, again not making comparative claims, we feel that our well-established safety profile provides a physician and a patient an excellent balance of clinical benefit with tolerability and are confident that that perception is shared by the clinical community to whom we currently commercialize and by the KOL community itself.

So I will tell you I think it is absolutely inappropriate for any company, including ours, to claim a best-in-class status. We don't know enough yet. But I will say nobody has shown better data in the second-line maintenance populations than we have. We're proud of our data. We're proud of our drug. And we know our commercial organization will compete very well with the data set we have.

Let me just ask a hypothetical question, and I don't have a Magic 8 Ball either. I do have a Ouija board. But I was wondering what if the label that AstraZeneca gets doesn't specify that it's for all-comers? What if it basically says something like, "is approved for second-line maintenance therapy," and there is limited data outside of BRCA patients to support usage, but leaves it up to the physician to actually make that decision? How do you think -- I mean I guess, on one hand, you've got LYNPARZA that's been out there for a longer period of time and then you've got you and you've got TESARO with data that earned the label. I mean how do you think physicians will decide which one to use outside of the BRCA patients?

So I'd like you run that question by the Ouija board because I think it's probably going to be more knowledgeable than I am. So, Andy, I would be stunned if a label from the United States Food & Drug Administration said something along the lines of, "We don't really have any data, but go ahead and use it in everybody." I'm paraphrasing you. But I would be stunned if a label said that.

We are driven by data still in this industry. And while FDA may accept data from a different trial with a different formulation as the basis of an all-comers label, I cannot imagine a world in which those data wouldn't have to be in Section 14 as the basis of their indication. I don't even know if AstraZeneca would like that because it puts them in a really weird situation with regard to training their reps. How do you arm wave? "Here's our BRCA data, but use it in everybody." "Well, tell me why." "I don't know" I mean so I don't see it, Andy. I appreciate it's a hypothetical, but I think it's an unlikely hypothetical.

Thanks, everyone, for your interest in Clovis today. If you have any follow-up questions you can reach me at [303] 625-5022 or Breanna at 303 625-5023. This call can be accessed via a replay of our webcast on our website in about an hour and it will be available for 30 days. Thanks for your interest and time and have a good evening.

Ladies and gentlemen, this does conclude today's presentation. You may now disconnect, and have a wonderful day.