Clovis Oncology Inc (CLVS) 2017 Q4 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Fourth Quarter 2017 Clovis Oncology Earnings Conference Call. (Operator Instructions) I would now like to introduce your host for today's conference, Anna Sussman, Vice President of Investor Relations and Corporate Communications. Please go ahead.

Thank you, Amanda. Good afternoon, everyone, welcome to the Clovis Oncology fourth quarter year-end 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 on 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 key components of our corporate update provided in today's news release as well as an update on our U.S. and EU regulatory status for Rubraca and our clinical development programs; then, Dan Muehl, Clovis' Senior Vice President of Finance and Principal Finance and Accounting Officer, will cover the financial results for the 2017 fourth quarter and year-end 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 security laws, including statements concerning our financial outlook and expected business plans. All these statements are subject to risks and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. Please refer to our recent filings with the SEC for a full review of the risks and uncertainties associated with our business. Forward-looking statements speak only as of the date on which they are made, and Clovis undertakes no obligation to update or revise any forward-looking statements. Additionally, please note that we'll 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. And thank you for joining us this afternoon. I want to apologize, I'm losing my voice, so apologies in advance if you can't hear me all that well if I cough.

Let's begin the day with a review of our launch here for Rubraca. I'll remind you that our initial Rubraca approval was read at December 19, 2016, for a fairly narrow mutation-specific ovarian cancer treatment indication and our commercial team has been out in the field, selling Rubraca for just over a year now.

We achieved $17 million in net sales during the fourth quarter and $55.5 million for the full year. As noted in the news release, this does not include the $4.7 million in the fourth quarter and $14.1 million for the full year in commercial value provided to eligible patients as free growth supply through our patient assistance program. As it did in the fourth quarter, this continues to represent approximately 20% of overall commercial supply.

Since the launch, nearly 1,400 new patients have initiated therapy and over 900 healthcare providers have prescribed Rubraca. Sales increased very slightly in the fourth quarter over the third quarter, and we have had 4 consecutive quarters of growth, despite approvals for 2 of the PARP inhibitors with substantially broader labels. In fact, we are participating in a rapidly evolving ovarian cancer market, which I'll describe now briefly. At the time of our launch, Rubraca became the second PARP inhibitor approved in the U.S. for later-line treatment for patients with mutations of BRCA. In the second and third quarters of 2017, the first PARP inhibitors indicated for the second-line maintenance treatment setting will approved in all comers, with no requirement for diagnostic testing. As a result of data in this setting, including our own ARIEL3 data set, maintenance treatment is rapidly becoming the standard of care for advanced ovarian cancer patients, which limits the available patient population for third-line treatment with a PARP inhibitor. In addition, it has become rapidly apparent that given the choice of treating all comers, or ordering a tissue-based diagnostic test to identify the 25% of patients who are mutant BRCA, physicians, clearly, are taking advantage of this new opportunity to avoid the costs and delays and a times frustrations associated with diagnostic testing. Based on results from the ARIEL3 study, we believe Rubraca will be highly competitive in addressing that all-comers maintenance population, once approved by the FDA. We are very enthusiastic about these data, and I'll provide more detail on the supplemental NDA, currently under review by the FDA, in just a few moments. So for now, and potentially after our PDUFA date of April 6, we continue to be limited to a relatively small population of addressable mutant BRCA patients. We belove -- believe our firm performance today in this population reflect the general confidence prescribers are gaining with Rubraca as their experience and familiarity with the clinical profile increases. Many of the clinicians that are using Rubraca today, of course, are the same clinicians who prescribed it upon potential approval of a broader maintenance label. Overall, we are pleased with the first full year of the Rubraca launch, despite the headwinds resulting from the adoptions of second-line maintenance indication in the U.S. ovarian cancer community.

Of course, these headwinds should become tailwinds upon our anticipated approval in the maintenance setting. As mentioned on the third quarter call, and as we've achieved in our fourth quarter results, we continue to expect sales to be stable to modestly up until receipt of an approval for the maintenance indication for Rubraca. Importantly, the feedback we are receiving from clinicians about their experience with Rubraca suggests that the clinical profile of Rubraca is well regarded and provides clear benefit to their patients. As a result, and based on the data from ARIEL3, we believe Rubraca will compete well upon potential approval for second line-maintenance indications, hopefully very soon. I'll turn now to discussing our regulatory progress to date for both the U.S. and Europe. Starting with the U.S., as noted earlier, our PDUFA date for a supplemental NDA to the FDA is April 6, 2018. The submission is based on the robust ARIEL3 data for the maintenance treatment of patients, with recurrent epithelial ovarian, fallopian tube or primary peritoneal cancer who are in complete or partial response to platinum-based chemotherapy.

The ARIEL3 data were our highlight for 2017, beginning of the top line in June, followed by the presentation of the comprehensive ARIEL3 data set at ESMO in September and a subsequent publication in the Lancet. We've been gratified 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 to seek its approval in Europe as well, so that all-comers population of recurrent ovarian cancer patients can have access to this very important drug. We look forward to providing an update on our U.S. regulatory process sometime between now and April 6.

Turning now to our regulatory progress in Europe. Our European submission for Rubraca for the mutant BRCA ovarian cancer, third-line treatment setting, was accepted during the fourth quarter of 2016 and remains under review by the EMA. As we announced last week, the CHMP communicated to us a positive trend book for Rubraca at their February meeting, following a Scientific Advisory Group meeting and an oral explanation that was held early last week. They also communicated their intent to hold the CHMP opinion vote on the treatment indication at the March meeting.

We anticipate that the indication statement will be focused on the subset of platinum-sensitive disease, where there's, particularly, high unmet medical need. Pending a positive opinion by CHMP in March, final approval by the European Commission would follow in the second quarter of 2018.

Upon receipt of this potential approval for the treatment indication, we intend to submit, what's called a variations, to the marketing authorization for Rubraca to include the second-line or later maintenance treatment indication directed at the broader all-comers population based on ARIEL3. We anticipate a potential CHMP vote for the maintenance indication by year-end 2018, and assuming a positive vote, a formal approval in early 2019. It's important to note here for those less familiar with the European regulatory processes, that upon receipt of the first approval, the second submission is required to be reviewed on a 6-month review clock. Beyond the benefits of the treatment indication itself, we are pleased that a potential approval and treatment would also lead to a more rapid review for the broader all-comers maintenance indication. Given this timing, we're actively building at our own European commercial and medical affairs leadership teams, obviously, the majority of planned European hires, including the sales forces will coincide with reimbursement approval in the individual countries. We also now, of course, have a regulatory clinical safety, quality and supply chain teams in place in our Cambridge U.K. office.

And let me turn to an update on clinical development, including our broad clinical collaboration with Bristol-Myers Squibb, for multiple combination studies of Opdivo and Rubraca.

In late July, we and Bristol-Myers Squibb or BMS, announced a broad clinical collaboration agreement to evaluate the combination of their first-in-class immunotherapy Opdivo or nivolumab and our PARP inhibitor Rubraca in pivotal Phase III clinical trials in advanced ovarian cancer and advanced triple-negative breast cancer as well as a Phase II clinical trial in metastatic castration-resistant prostate cancer. We are working closely with BMS to get all these studies up and running, a metastatic CRPC study initiated in late 2017 and the pivotal studies in advanced ovarian and advanced triple-negative breast cancer are both expected to begin during the first half of 2018.

These studies will be conducted in the United States, Europe and additional countries. The advanced ovarian cancer study will focus on first-line maintenance treatment, and is known as ATHENA, which will be sponsored, funded and conducted by Clovis. The Stage III study will evaluate Rubraca plus Opdivo, Rubraca, Opdivo and placebo and newly diagnosed patients with Stage III/IV high-grade ovarian fallopian tube or primary peritoneal cancers who have completed platinum-based chemotherapy. This study in approximately 1,000 patients includes an all-comers population with a similar step-down statistical plan to ARIEL3.

Phase III pivotal study in advanced triple-negative breast cancer will be sponsored and conducted by BMS with all cost shared equally between BMS and Clovis. BMS is expected to describe the trial design at a later date, might be closer to study initiation. The Phase II prostate cancer study initiated in late 2017 and is sponsored, funded and conducted by BMS. This study will evaluate the safety and efficacy of Opdivo in combination with Rubraca in patients with metastatic castration-resistant prostate cancer and is being conducted as an arm of a larger BMS-sponsored study in a total of 300 patients. We are extremely enthusiastic about our clinical collaboration with BMS. It provides us the opportunity to partner with a leader in immuno-oncology and equally important, a company with a shared strategic vision of Rubraca and Opdivo should be developed in multiple indications in a timely manner to hopefully, create the greatest benefit for patients. Turning now to the rest of the Rubraca development program, I'll start with our company-sponsored studies including ARIEL4, our confirmatory study in the ovarian cancer treatment setting, which is presently open for enrollment. It is a Phase III, multicenter randomized, confirmatory study of Rubaraca versus chemotherapy and relapsed ovarian cancer patients with BRCA-mutant ovarian cancer. Tumors have progressed after 2 or more prior lines of therapy. Primary endpoint of this study is progression-free survival. We also have 2 Clovis-sponsored, prostate cancer trials that are actively enrolling patients. The first Clovis-sponsored prostate trial is TRITON2, our Phase II single-arm study, inclusive of patients who have a germline or somatic BRCA or ATM mutation or other deleterious mutations in HR repair genes. These tumors have progressed after receiving 1 line of taxane-based chemotherapy and 1 or 2 lines of androgen receptor targeted therapy in the castrate-resistant setting. The planned primary endpoints are radiological, overall response rate and patients with measurable disease, PSA response in patients without measurable disease. If successful, this trial is designed to support a supplemental NDA submission for an accelerated approval. As tracking to as an open label study, we're planning to present initial data from the study at a medical meeting in the fall, hopefully, ESMO. Our intent would be to include data on 40 to 60 patients with sufficient median time on drug to provide a true initial view of activity in this genetically-defined advanced prostate cancer population. Our second Clovis-sponsored prostrate study is TRITON3, a randomized comparative Phase III study that includes patients who have a tumor germline or somatic BRCA or ATM mutation, who are progressed on AR-targeted therapy but not yet received chemotherapy in the castration-resistant setting. The study will compare Rubraca to physician's choice of AR-targeted therapy or chemotherapy. Planned primary endpoint is radiologic progression-free survival and this study could potentially serve as a confirmatory study, showed the TRITON2 study warrant an accelerated path. One of our newer studies, called ATLAS, is a single-arm Phase II open label study of Rubraca as monotherapy in recurrent metastatic bladder cancer. This is all-comers population with no selection based on a HRD status and the study is now open for enrollment. Eligible patients are those who have failed 1 or 2 prior therapies.

And finally, turning to additional collaborator-sponsored trials, the Phase Ib study in collaboration with Genentech. To evaluate a novel combination therapy of their cancer immunotherapy TECENTRIQ or atezolizumab and Rubraca continues to enroll patients. Phase I portion of the study sponsored by Genentech, Roche is now complete and the recommended Phase II dose is full dose of atezo and full dose Rubraca.

Trials now are ruling patient cohorts in triple-negative breast and ovarian cancers. Our newest Clovis-sponsored study is called RUCA-J, our Phase I Japanese study, in which the first patient was dosed with Rubraca last week. The study was safety in PK's primary endpoints, seeks to identify the recommended dose of rucaparib in Japanese patients, which will enable development of our bridging strategy and potential inclusion of Japanese sites and plan to our ongoing global studies. Now I'll turn the call over to Dan to discuss fourth quarter and full year financial results.

Thanks, Patrick, and good afternoon, everyone. Our fourth quarter and year-end 2017 financial results were 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 $17 million for the fourth quarter of 2017 and $55.5 million for the year ended December 31, 2017. The supply of free drug represented an additional $4.7 million in commercial value during the quarter and an additional $14.1 million in commercial value for the full year. This supply continues to represent approximately 20% of the overall commercial supply. The majority of these patients are Medicare patients. Since Foundation support for uninsured and underinsured was not available in 2017, to the extent it has been in previous years, a larger number of patients saw assistance through other means, including companies' patient assistance programs. We expect the supply of free drug to remain in this range for the foreseeable future. Turning now to our balance sheet, we ended 2017 with $563.7 million in cash, cash equivalents and available-for-sale securities.

In January 2017, we raised net proceeds of $221.2 million through an offering of 5.75 million shares of common stock, and in June 2017, we raised net proceeds of $324.6 million through an offering of 3.92 million shares of common stock. Cash used in operating activities was $65.6 million for the fourth quarter of 2017 and $260.9 million for the year compared to $54.7 million for the fourth quarter of 2016 and $266.7 million for the year ended 2016. Cash used in operations includes drug product supply cost of $12 million in the fourth quarter of 2017 and $53.5 million for the full year 2017, compared to 0 and $19.2 million for the comparable periods in 2016. These drug supply costs will increase in 2018 as sales grow, clinical trials expand and we build inventory and safety stock related to our transition to a new manufacturing facility anticipated to open in early 2019. We believe this new facility will not only support anticipated future for drug supply needs for Rubraca, but will do so at a substantially lower cost than our current drug supply. We reported a net loss of $51.9 million or $1.04 per share for the fourth quarter of 2017 at $346.4 million or $7.36 per share for this full year of 2017. This compares to $70.7 million or $1.83 per share and $349.1 million or $9.07 per share for the comparable periods in 2016. Net loss for the fourth quarter of 2017 included share-based compensation expense of $12.5 million and $44.7 million for the full year 2017 compared to $10.1 million and $39.8 million for the comparable periods of 2016. The net loss for the year ended December 31, 2017 included a charge of $105.5 million related to the portion of legal settlement paid in Clovis common stock. The net loss for the year ended December 31, 2016 included a charge of $104.5 million for an impairment of an intangible asset, a gain of $25.5 million for a reduction in fair value of contingent purchase consideration and a $29.2 million noncash tax benefit.

The adjusted net loss, excluding these items, was $63.4 million or $1.27 per share for the fourth quarter and $240.9 million or $5.12 per share for the full year of 2017, compared to $70.7 million or $1.83 per share for the fourth quarter of 2016, and $299.2 million or $7.78 per share for the full year of 2016. Our fourth quarter 2017 R&D expenses totaled $38 million and $142.5 million for the full year 2017. This compares to $54.5 million and $251.1 million for the comparable periods in 2016. The decreased year-over-year is primarily due to lower spending on Rubraca and rociletinib development activities and classifying a central -- selling, general and administrative certain expenses related to the commercialization of Rubraca that would be classified as research and development, prior to FDA approval. Selling, general and administrative expenses totaled $38.5 million for the fourth quarter and $138.9 million for the full year 2017. This compares to $12.2 million and $40.7 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 have been classified as research and development prior to FDA approval. Now I'll provide some color on Rubraca from a finance perspective. We distribute our product principally through a limited number of specialty distributor and specialty pharmacy providers. These customer subsequently resell our products to patients and healthcare providers. Separately, we have arrangements with certain payers and other third parties that provide for government-mandated and privately negotiated rebates, chargebacks and discounts. As noted previously, net product revenue was $17 million for the quarter. Revenue is recorded net of estimated rebates, chargebacks, discounts and other deductions as well as estimated product returns. These gross to net adjustments totaled approximately 8% of gross revenue for the fourth quarter and the full year of 2017. Gross to net adjustments are expected to remain in the high single digits as a percentage of gross revenue in 2018, assuming that the distribution and payer mix remain consistent.

In 2017, we recognized revenue on product sales once the product was shipped to the patient or healthcare provider by the specialty distributor or specialty pharmacy provider. With the new revenue recognition standard, ASC 606, effective January 1, 2018, we will recognize revenue on ship into the specialty distributors and specialty pharmacies. There will be a positive adjustment of $2.3 million to retain the earnings on January 1, 2018, to reflect a net impact of the remaining product value at specialty distributors and pharmacies at December 31, 2017, including applicable cost of sales, gross-to-net and other adjustments. As a result of this change in accounting standard, you can regard the approximately $3.4 million in inventory at our specialty pharmacies and distributors at year-end as revenue that will never get recognized. Our distribution mix for the year was approximately 72% specialty pharmacy and approximately 28% specialty distributor. And our payer mix was 63% commercial, 26% Medicare and 11% Medicaid and other. Cost of sales for the fourth quarter ended December 31, 2017, was $3.7 million, and $11.7 million for the full year of 2017. This represents approximately 22% for the quarter and 21% for the full year of net revenue. This consists of costs associated with the sale of Rubraca, mainly freight, royalties and amortization of capitalized acquired intangible license rights 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 December of 31, 2016, were expensed prior to the December 19, 2016 FDA approval, and therefore, are not included in the cost of sales during the current period. We expect cost of sales percentage to increase in 2018 in relation to net product revenues with the depletion of these inventories, as we have used the majority of the pre-commercialization of inventory through the fourth 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 had the impact of lowering R&D expenses and increasing our selling, general and administrative expenses on a comparable period basis from 2016 to 2017. We expect our selling, general and administrative expenses to increase in 2018 in support of a potential launch of the U.S. maintenance label approval and European commercial and administrative infrastructure and advance of potential product sales there. Clinical trial, expense is shifted in composition in 2017 with the winding down of our rociletinib trials, ARIEL2, ARIEL3 and Study 10 for Rubraca. The ongoing TRITON2, TRITON3, ARIEL4, the new ATHENA and ATLAS trials as well as other company-sponsored trials, collaborations and investigator-initiated trials will increase our R&D spend in 2018. I'll turn the call over to Pat.

Thanks, Dan. All right. We assembled in a building here at Clovis with several meaningful activities for Rubraca underway. We did well with our very limited treatment label in the United States and look forward to the opportunity our anticipated all-comers maintenance label will provide us to make the drug commercially available to a much larger population of ovarian cancer patients. We expect this opportunity to compete in the all-comers maintenance population will occur on or before our April 6 PDUFA date. We anticipate a CHMP opinion for Rubraca in the treatment setting in March, following last week's positive trend vote and a potential EU approval in the second quarter. We plan to follow this in the very near term with a variation to the MAA filing for a broad maintenance treatment indication and with a 6-month review clock to have a CHMP opinion on the maintenance setting before the end of 2018. Our robust prostate cancer development program is well underway enrolling patients, focused on specific mutations of Rubraca, ATM and other HRD genes with a potential path to accelerated approval and we look forward to a first look at the TRITON2 data, hopefully, at ESMO in October. Our ATLAS spider study is open for enrollment and we look forward to demonstrating Rubraca's activity in that all-comers patient population and our clinical collaboration for Bristol-Myers Squibb is underway, including 2 Phase III studies to commence during the first half of 2018 and 1 large Phase II study already enrolling patients, evaluating Rubraca and Opdivo in combination in ovarian, triple-negative breast and advanced prostate cancers. With that, I'll be happy to answer any questions you may have.

(Operator Instructions) Our first question is from the line of Alethia Young of Crédit Suisse.

This is Ellie on for Alethia. Just in terms of the Bristol collaboration, can you talk about some of the gating factors between -- before you and Bristol start enrolling the Phase III combo studies in ovarian and breast. And then also, just as we start to learn more about using checkpoint inhibitors and relevant biomarkers, can you talk about your strategy for the biomarker analysis in these trials?

Yes. So in -- I mean, the key factors in getting the 2 trials that are enrolling yet underway are literally just finalizing the product or getting into IRB's and all of the normal process of getting trials up and running. But we do anticipate all that will be completed in time for us to launch each of those studies in the first half of 2018. As noted, the prostate cancer trial is already enrolling. You asked about biomarkers for use in the 3 trials. It's different in each of the trials. So as noted in this script, the ARIEL3, -- excuse me, the ATHENA trial, will sort of mimic the ARIEL3 study in the way we look at the populations. The goal will be, first, to look at the BRCA HRD population and then if successful we'll look on to all comers. But the goal of that is it was successfully so with ARIEL3 will be to get to an all-comers population, but in a step-down manner. In the Phase II study, which is not a registration study, what everybody like about the study is looking both at the BRCA and HRD population, but we also are looking -- I should say bristol is, because they are running the trial and a biomarker negative population, so we'll be able to evaluate the combination, both in biomarker positive patients and in biomarker negative. In the triple-negative breast cancer study, the intent is to look at Rubraca and a select group of biomarker positive patients but we have not yet fully described that trial and so will give the details of the biomarker strategy for the triple-negative breast cancer study at some time over the next several months.

Our next question comes from the line of Peter Lawson of SunTrust Robinson.

Just on kind of the, I guess, off-label use for rucaparib in the maintenance setting. How much of that do you think you're seeing?

Yes, I think we probably see about 10% of our sales, or where we know for sure, they are in the maintenance setting. As we've talked about, Peter, this maintenance transition to treatment after 2 rounds of chemotherapy is a little bit rocky. So I'm not positive we capture that perfectly. But we think from what we know, at least, 10% are already maintenance. But an important caveat is that all of those patients are mutant BRCA, so we are not seeing evidence of off-label use in the non-BRCA population.

Got you. That's very helpful. And then, just how should we think about this sales force built within the EU and the U.S. over the next 12 to 18 months?

In the U.S., we've taken our field-based organization, which is not limited to commercial it includes Medi-Fair's representatives, field-based management, some experts in reimbursements. From right around a 125 individuals to right around a 150 individuals. So the entire team is -- I think the entire team has been hired and prepared for the relaunch, if you will, upon the approval from the FDA. In Europe, I imagine that, at peak, we will have around the same number of field-based individuals, it might be slightly larger, but not markedly larger. But the timing of many of those hires, if not the majority of those hires, will be phased country by country as we receive reimbursement. So the approval is, step one, as you know, reimbursement is step 2, some countries, you can launch without formal reimbursement, some require negotiated reimbursement that can take a year, that's particularly in the south. But we will not hire the larger percentage of our European staff, including our field-based staff until we receive local country reimbursement.

Pat, just finally, just on the TRITON2 data. Do we get PFS data at ESMO?

Well, probably not. And it's not because it is, I think, a secondary end point of the trial but the regulator never believes that PFS and the single-arm trial is all that relevant. So I'm going to hunt knowing that if I said the wrong thing, Lindsey would have jumped in. But I think I'll just punt and say right now, we intend to put in response-rate safety, duration of response and we will discuss if we intend to put PFS in that poster, but we haven't discussed that yet.

Our next question is from the line of Kennen MacKay of RBC Capital Markets.

Congrats on the positive trend vote on the SAG in Europe. Pat, had heard your comments on sort of a competition specifically within second line maintenance in the U.S. And I guess would love to, again, more specifically understand sort of how you're viewing Rubraca as commercially competitive versus the competition that maybe has a few months headstart here in second line maintenance with a broad label? Is that sort of safety, data within the label, we just want a perspective on how you're thinking about that?

Like all companies now with recent guidelines from FDA will compete on the basis of the label data and, to some extent, from scientific publications. At a minimum, everything we know, even including the primary endpoint of the trial, which is positioned as progression-free survival, is that number is highest for Rubraca. I will hasten to tell you I'm well aware that number only includes non-BRCA for the 9.4 months that's in the TESARO label, but that is the number that's in the TESARO label, is 9.4 months. And of course, it's 8.4, I think, for AstraZeneca. So we come in with a powerful statement about progression free survival from the label and a higher number, as you're aware, from the publication. You're aware that we have demonstrated uniquely improvements in response in many patients, particularly, BRCA patients who are in the trial. And we have a well-defined and characterized safety profile that is seen as, I believe, amongst the easiest to manage of the safety profiles for each of these PARP inhibitors, with 1 outlier being one that is somewhat more difficult than the other 2. I am really confident that, while we are third, each of those 2 was approved less than a year ago, one less than 6 months ago. So it's not like they had time to create a market. The vast majority is still -- the maintenance patients are still not being treated. So we are optimistic, given the profile of our drug, given the feedback we get from patients -- or physicians who are ready to prescribe it having a good success in the treatment setting and given the characteristics of the data set where we will compete exceptionally well once we are in the market with the label.

Got you. And then in Europe, I was wondering if you could help us with a little bit more color on what that label could look like. It looked like it was refined a little bit versus what we've seen in the U.S. in the third line plus treatments setting. So I guess how should we be thinking about platinum-sensitive patients that are sort of at higher risk? And then also had wanted a little bit more color on plans in bladder cancer, urothelial and how we should be thinking about the monotherapy study that you're doing and potential combos there, especially as it relates to one of the combinations announced from a competitor today in urothelial?

Yes, of course. So first, until the label is really finalized, I wouldn't want to say more beyond what we've stated so that, as you think about it, it's platinum-sensitive only that we've been clear on, and it will be a subset of platinum-sensitive only but that needs to be agreed when the CHMP vote is held at the end of March, so if you can hold that thought. But what I will tell you is that while this treatment indication has the potential to be important in that subset of patients and I think will leave us uniquely, assuming a maintenance approval, the only PARP inhibitor approved in both the maintenance and a subset of the treatment setting. Given the timing of getting reimbursements following an approval, I would not project much in the way of any -- in European sales this year. And by this time next year, we would expect or hope to have the maintenance label, which will be the predominant source of our revenues in the EU. So I hope that answered your revenue question. On bladder, we're open for enrollment now in a study called ATLAS. It is a monotherapy study in all comers. There will be a step down analysis, where we look at HRD, BRCA pooled as one first and then all comers, so we have a safety net under our all comers analysis. But we are -- we're just enrolling all comers, you're not required to have the result of your diagnostic test before you enroll in the trial. This will be in a patient population, limited to patients who -- for some metastatic bladder cancer and have failed 1 or 2 therapies but not more than that. So it's a relatively -- it's as early as a stage as you can get in recurrent bladder cancer. We too have signaled that we are enthusiastic about the potential to move into an earlier line study in combination with a PD1. And I hope that, at some point over the course of 2018, we're able to describe who that partner is and when we would intend to start that study.

Our next question is from the line of Terence Flynn of Goldman Sachs.

This is Jason on for Terence. Can you give a little more color on the 2018 OpEx guidance, especially as you approach the maintenance launch and then as well as the EU launch?

Yes, so as we indicated in my comments, with the transition to a lot of the new trials we have this year, the R&D line is going to increase from '17 to '18. And similarly with SG&A, with the U.S. launch and then building out infrastructure in Europe for commercial and for the administrative portion of it. We haven't given any specific numbers around what that is, but -- and not to make it too confusing, but we, of course, had this change of classification from '16 to '17 that we described as well. So R&D is substantially lower in '17 than it was in '16. And the biggest chunk of that is the difference in classifying the commercial group in SG&A. And then similarly, the SG&A expenses were significantly higher in '17 compared to '16 because of that same effect. So you're going off of the lower base starting in '17 so -- for R&D, so that will certainly increase in 2018. We prefer not to give specific guidance around the numbers with that, just because of the variability and the start dates of the trials and the pace of enrollment, not only for patients but for sites. So for now, I think from a modeling point of view, you'll want to look at it from increased R&D, increased SG&A, but can't give you any more specifics around that.

Our next question is from the line of Michael Schmidt of Leerink.

I had a few. Maybe first, Patrick, regarding your view of the overall opportunity for PARP inhibitors in the second line maintenance setting. It's obviously the much bigger pie, I guess, for Rubraca to get a piece of. And just wondering based on EU market research at this point, what percentage of platinum responders are actually on PARP inhibitor maintenance right now in the U.S.? And where do you expect this percentage to peak out?

Yes, I would say that we don't have perfect information, so this is based on market research but it doesn't mean it's perfect, that probably somewhere between 25% and 35% of patients now have seen the PARP inhibitor and the vast majority in the maintenance setting. Obviously, that leaves a large market to penetrate for each of the 3 PARP inhibitors over the course of the next couple of years as those who have limited PARP inhibitor experience decide to try it, those who have been focused on Avastin decides to try a PARP inhibitor, there are going to be a lot of changing dynamics in this market. I think market size is complicated because it's driven not only by patient starts but patient finishes, meaning duration, which is variable, I think, for these 3 drugs, and dose which, in our case, we don't see a lot of dose reductions. Certain other cases, a lot of dose reductions that has a huge impact on the definition of a market size when the cost per month is so much lower. So I won't give you a market size except to say it's an important market. It's a market that clearly has seen pretty rapid adoption, given that the 2 drugs approved in this space, one is approved for 5.5 and 6 months; one, 9 months or something like that. And I think that adoption is going to continue, and we will be a driver of some of that adoption once we get the label and are able to communicate about the benefits of Rubraca.

And then, in context of the TRITON2 study, you talked about potentially providing a response rate and duration information at the sort of first interim look. And just wondering in terms of the final data for the study. What is the clinical efficacy bar in terms of approvability and data they're submitting for the draft uptake in this indication of prostate cancer?

Yes. Obviously, it's going to be in the eyes of the FDA. And the FDA doesn't provide a sponsor -- at least in my experience, it doesn't provide a sponsor of their guideline on what number they need to see. They do take into account line of therapy, and they do take into account duration and they do take into account tolerability. When they're looking at what response rate they want to see, they're looking really at more than a response rate. What I will say is that in these later line patients who failed chemo, they don't really have any further options, sadly. And secondly, chemo itself has rendered a 2.25-month or a 3-month progression-free survival and a response rate that I think is in the 15% range for the docetaxel. It might be slightly higher but it isn't that much higher than that. I'm not telling you 15% is good enough, but I'm telling you I wouldn't think you need to have a number that like you've seen us deliver in earlier line or later line ovarian cancer. These patients, I think, are going to be somewhat later line even than our ovarian cancer population and, therefore, I think that has to be taken into account when you consider an acceptable response rates.

Right, great. And then last question. You talked about several studies that are ongoing or about to start with Rubraca, in some cases, in combination with PD-1 inhibitors. How do you view the opportunity to combine Rubraca with other agents? For example, MEK inhibitors, I think, there's a pretty interesting rationale to look at that combination. And how do you think about exploring additional combination for Rubraca?

No, we believe in it. Can't comment specifically on the MEK inhibitor. But we are opening a trial this year called Starfish, it is a many-armed study. I'm not kidding. That's how we came up with the name Starfish. And our first combination will be with our own VEGF, PDGF, FGF inhibitor lucitanib. So we clearly see an opportunity to combine with other agents. And I imagine over the course of this year and next year, we will be announcing additional combinations. I don't want to say anything now and then get ahead of our team, but we will be announcing combinations beyond the combinations with lucitanib over the course of this and next year.

Our next question is from the line of Tazeen Ahmad of Bank Of America.

And our next question comes from the line of Paul Choi of Barclays.

Pat, my first question is on the market and with regard to anything you're observing from the recently announced Merck-AstraZeneca collaboration, whether it's having any impact as far as you can tell on prescriber behavior and whether there's anything from your learnings from observing this whether -- upon your maintenance launch, you think you can do to increase duration of treatment here in the U.S?

Yes, first of all, it's relatively recent that -- I mean AZ has been commercializing LYNPARZA now for 3 or 4 years. And obviously, with the maintenance label, are fully committed to it. Merck is relatively new, having signed up in July, and I think, really begun their commercial efforts toward the end of '17. So it's a little early for me to talk about the dynamics -- the effect of those 2 organizations are having on the market. They are formidable, knowledgeable, committed and we're certainly highly respectful of them. My understanding is LYNPARZA, partly related to their efforts but a lot related to experience with the drug and the new maintenance label, had a really good fourth quarter. And we'll see if that bears out when they report their actual fourth quarter than if they continue that for the fourth quarter which they have announced into this year. I will come back to what matters most to physicians is not whether the person in their office is from company A, B or C, but the characteristics of the drug as trials have demonstrated and the label allows. And I think that we will have real advantages based on ARIEL3 when and assuming we get that full approval and maintenance some time in the next several weeks and certainly by April 6. Yes, the second part of that question, Paul, and I rambled so long, I forgot what it was. What was your second part?

Sure, Pat. It was with regards to learning from the other maintenance launches and what you think Clovis can do with regard to potentially improving the patient mix so that you get a longer duration -- average longer duration of therapy?

Yes, that only comes with some time. It's true of almost every oncology launch that often the first patients treated were those who may have been a little more advanced in their disease. And no matter how good a drug, you're going to run into some experiences in this patient population that just can't be as good as they would be at a somewhat earlier stage on a healthier patient. I do think it's [proven] on us as it is about every sponsor to make sure that every effort is made to help physicians and patients understand the importance of adherence in preventing in the case of this indication recurrence of the disease. And that includes being thoughtful about when and if necessary to dose reduce and understanding whatever the patient is going through so that the physician can think about the best way to manage that patient, while keeping them on therapy. So I think that's what everyone of us is probably trying to do. I will say that our experience, so far, has been feedback from physicians suggests that it's a well-tolerated drug. No drug is perfect, but patients can tolerate Rubraca pretty well, given alternatives.

And then I just have 1 pipeline question with regard to ATLAS. As you think about it, is the PD-1 and PD-L1s that were approved with single arm open label trials the relevant comparator here in your mind. And given the fact that the FDA has approved such single arm open label trials, is that a possibility in your mind for ATLAS?

It is a hope for ATLAS. And it will be a large enough trial to deliver a sufficient number of patient experiences that in the event that the outcome is positive that we would seek an accelerated approval, yes, that would be the -- that is the plan.

Our next question comes from the line of Jing He of Gabelli.

So at JPMorgan, Pat, you talked about the size of the PARP market being around $1 billion to $2 billion if we use Rubraca or LYNPARZA pricing. Could you help us to understand what are the major differences in your assumptions between low-end and high-end of the range?

Well, a lot of it is going to be just adoption. I think we always end up coming up with a range of what is credible and what is aspirational when we put these ranges together. And there are going to be a lot of drivers having to do with adoption, duration, to what extent price or the price we set at least for us. So I think most people just give themselves the safety net of a range.

Okay. And also, could you share your thoughts on the pricing? What kind of payers feedback you've got so far as the cost of one PARP inhibitor is significantly lower than the other 2?

So that's just not true. A [buck] of the supply for each of the 3 approved PARP inhibitors costs between $14,500 and just around $15,750. That is what a payer pays. [Arm] leaving, trying to turn toxicity into a virtue does not cause better pricing. So I will tell you that until a bottle price comes down, payers see these as the same price product. And further, I'll tell you, unrelated to that, that we have not seen any pushback from payers of any significance to our price. Because the fact is, it's consistent with other recently launched oncology drugs. And as you're well aware, ovarian cancer is a really, really small percentage of the overall healthcare budget for these payers.

And also, lastly, do you see any use in breast or prostate cancer at this point?

I don't know specifically. But my understanding is around 9% or 10% of our sales are in non-ovarian, but of course BRCA-mutated patients. And I imagine without knowing that some of that is in prostate and some of that is in breast. So those will be the 2 most logical.

Our next question is from the line of Alex Schwartz of Stifel.

Just a little bit more on the pipeline. With your Phase I Japanese bridging study, how might agent patients respond and metabolize Rubraca differently than U.S. patients? Any expectations also on when you may be able to submit a package for approval to regulatory authorities? And then secondly, is there an update you can provide when we might see initial Phase I data of Rubraca plus TECENTRIQ safety data? I know you're not the sponsor, but is there kind of any update you can provide there?

Yes, we don't have any reason to believe based on the profile of Rubraca that the experience in Asia or Japanese patients will be different than the experience of U.S. or European patients. And I will point to the experience of olaparib which I think is in fact dose in Japan after they have studied it is the same as it is in the United States and then Europe. So we're doing the study, and studies are done for a reason. We could be surprised. But our anticipation, knowing what we know, is that ultimately the dose in Japanese patients will be the same as in the United States. I think your second question was on the TECENTRIQ combo. And I'm in the uncomfortable position of not being able to answer your question. We don't know when Genentech, the sponsor of the study, would intend to present data. I have heard from investigators that they hope that some data are presented this year, but I can't tell you that's the case, and I can't tell you what medical meeting. So when we know, we will, of course, communicate that.

Our next question is from the line of Andrew Berens of Morgan Stanley.

As we think about potentially SOLO1 reading out and the implications, I guess, commercially. I was wondering how you see that compacting the downstream opportunity for the PARPs and then also potentially the ATHENA trial?

Yes, well so in ATHENA, I don't think it will affect the ATHENA trial. I think we're enrolling a much broader population than SOLO1 enrolled, I'll come back to that in a moment. We do have the Rubraca-only arm because there is a desire to show what the combination looks like versus a well understood and characterized PARP inhibitor. So we have the ability to compare it to a PARP inhibitor if SOLO1 yields an approval in germline BRCA maintenance. To SOLO1 and its impact on the commercial environment. So there's no analogous Study 19. There's no opportunity for AstraZeneca and Merck to go beyond the SOLO1 population, which is germline-mutated BRCA patients. And that represents about 15%, 1 5, of ovarian cancer patients. So the vast majority of eligible second line maintenance patients from ours on the labels are still going to not be eligible for a [lab term], even if SOLO1 reads out positively, so that's part 1. Part 2 is we, of course, anticipate a very good outcome for SOLO1. It's a good drug in the population, BRCA-mutated, that do best on PARP inhibitors from evidence of the other maintenance studies. So I think it will be a positive. It will have to show a pretty meaningful PFS versus what we expect would be a longer PFS in the control arm because that line of patients tend to have a longer progression-free survival than second or third line patients. And treaters -- and we've known this about ATHENA, which is why we want so much for this PD-1 combo to be -- to represent meaningful impact. Physicians know that somewhere between 15% and 20% of patients, coming off surgery, coming off their platinum doublet, will not recur. So with all of us looking at frontline maintenance, we're going to have to generate meaningful data to overcome the evident fact that somewhere between 15% and 20% of the patients who are dosed would never have needed that drug. We're aware of that, I'm sure our co-part companies are as well. And then, Amy, the last thing I'll say is, we already see, and we can talk about the merits of this, but we already see that about 25% of our patients have had a prior PARP inhibitor. So the concept of PARP following PARP is rightly or wrongly something that is being actively pursued by treaters. This requires study, by the way, but these are complicated studies. Some of them are complicated to run. But particularly here, we happen to believe that if a woman has a strong benefit in the maintenance setting following her frontline therapy, goes on subsequent platinum doublet and benefits on that platinum doublet, our guess is that many physicians who while have continued to treat this patient will try maintenance again with a PARP inhibitor, if anything, to delay as long as possible a subsequent round of chemotherapy. So I guess I just have to say I don't think the market dynamics are going to be as substantial as one might fear.

Okay, can I just follow up then? I mean, I think that TESARO has presented some data saying that somewhere around 20% of LYNPARZA usage is on the frontline, which I find strange, given that there are no data yet to support that. And I guess, also what do you think the implications could be from the French cooperative trial that's ongoing, using Avastin [co pay]?

Well, again, the trial is not a registration trial, it's a publication and it may just tell people what they already know, which is one could consider combining a PARP inhibitor with Avastin. I don't believe I know the design of that trial. One, it's a cooperative study, two, it's not designed to be a registration study. So I don't think it's going to change what's registered and further in the event that market research is showing that some of the use, I think they even said in that same deck, Andy, that 18% of Zejula was in frontline maintenance. I remember -- I may have that a little bit wrong, but I think that's what they said. And all I will say is if physicians are prescribing and payers are reimbursing frontline use in maintenance, that won't be limited to 1 or 2 companies. It will be -- potentially, if that is occurring, it's going to occur for each of these drugs that physicians gain confidence and choose case-by-case, physician-by-physicians, the drug they like the best. So I don't think there's anything about that, aided and supported by data other than just knowing that you can jump from all this great phase -- sorry, second line maintenance to the possibility of frontline maintenance being even better. But I don't think that, that would be unique to one PARP inhibitor.

Our next question is from the line of Cory Kasimov of JPMorgan.

First, regarding Rubraca safety profile and the overall ease-of-use, you've been talking about, Pat. Sounds like liver tox isn't having much of an impact in the real world, but can you characterize this a little bit more? And how often do patients have to be dose reduced on Rubraca? And I have 1 follow-up.

So Cory, to get my hackles up, we don't have liver tox. We have not seen a case of liver tox. We have transient elevations of ALT and AST, which tend to rise in 30% of patients in their first cycle and almost always normalize by the end of their second cycle. So we don't know the cause, and we like to. This does occur to a lesser extent on olaparib and to a lesser extent on niraparib. But again, there is no liver tox. There is transient elevations of liver enzymes that have no downstream consequences. In the paper, there are right about 9% of patients who have Grade 3/4 elevations. And it is largely that percentage who would dose reduce. It's that population who have a higher reported grade, but that's the highest we would've seen.

And that's the only place it's really coming from, correct?

Coming from?

In terms of dose reductions, those that small percentage of patients who have the elevated liver enzymes?

Yes, I mean much of our experience with that is in the trials, but we aren't seeing any evidence of impact in the commercial setting at all.

Okay. And then with regards to prostate, do you have specific feedback from the FDA that TRITON2 can be used for registrational purposes or is this just a running assumption at this point after the experience in ovarian?

We have an agreement with FDA. It's not as far, so I'm trying to make sure I understand it, but a [minute] agreement with FDA about the trial and its potential use and what would allow it to be potentially used for an accelerated approval.

And the next question is from the line of Steven Breazzano of Evercore ISI.

Most of mine have been answered but just a quick one on the overall ovarian market. Just given your experience now on the market, is it your sense that most of the prevalent population has been worked through and that most of the new patient starts will be those coming onto second and third line plus?

It's normally through that whoever is first approved gets what in our study you call a prevalence and marketers tend to call it a bolus of patients are going to be more available to whoever comes first or whoever comes first and second, whoever comes third. So our opportunity will include newly diagnosed, or I should say, because not really newly diagnosed, newly eligible patients for maintenance, of which, there's 180 to 200 new patients every week or so in the United States. But because the market is not at all fully penetrated, as I said before, 25% to 35% perhaps, there will be physicians who have an experience with a PARP inhibitor, physicians who are waiting for rucaparib to start patients on rucaparib knowing that the approval is within a month or less. And so there will be some degree of prevalent patients who will end up on rucaparib, but that percentage will probably be lower than for either of niraparib or olaparib at the time they launch.

And at this time, this does conclude our Q&A session. I'd like to turn the conference back over to Ms. Anna Sussman for closing remarks.

Thanks, Amanda. Thanks everyone for your interest today in Clovis. If you have any follow-up questions, you can reach me at ( 303) 625-5022. This call will be accessible via replay at our website beginning in about an hour and it'll be available for 30 days. Thanks for your interest and time. Thank you, and have a good evening.

Ladies and gentlemen, thank you for your participation in today's conference. This does conclude the program. You may now disconnect. Everyone, have a great day.