Clovis Oncology, Inc.
Q3 2021 Earnings Call Transcript

Published: 3 Nov 2021

[Operator:]

Good morning. My name is Julienne, and I will be your conference operator today. At this time, I would like to welcome everyone to Clovis Oncology Q3 2021 Operating Results Webcast and Conference call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. Thank you. Anna Sussman, Vice President, Investor Relations, Corporate Communications, you may begin your conference.

[Anna Sussman:]

Thank you, Julienne. Good morning, everyone. Welcome to the Clovis Oncology Third Quarter 2021 Conference Call. Thank you for joining us. You’ve likely seen this morning’s press release, and 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. Today’s agenda includes the following, Patrick Mahaffy, our President and CEO, will discuss the highlights of today’s corporate update; and then, Dr. Tom Harding, our Chief Scientific Officer, will present an update on our FAP-2286 and targeted radionuclide therapy development programs; Dr. Lindsey Rolfe, our Chief Medical Officer, will discuss the anticipated upcoming clinical milestones for Rubraca and FAP-2286; and Dan Muehl, our Chief Financial Officer, will cover the quarter’s financial results in greater detail. Patrick will then make a few closing remarks. And then, we’ll open the call for Q&A, during which time, Pat, Dan, Tom and Lindsay will be available to answer questions. Before we begin, please note that during today’s conference call, we may make forward-looking statements within the meaning of the federal securities laws, including statements concerning our financial outlook and expected business plans. All these statements are subject to risks and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. Our actual results could differ materially due to a number of factors, including the extent and duration of the effects of the COVID-19 pandemic and the timing and extent of recovery from it. 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 cash burn, a non-GAAP financial measure during today’s conference call. Required disclosures related to this are in today’s news release, which can be found on our website. Now, I’ll turn the call over to Patrick Mahaffy.

[Patrick Mahaffy:]

Thanks, Anna. Good morning, everybody and welcome. We appreciate you taking the time to hear us today. Sales in Q3 2021 were $37.9 million, an increase of 3% over the prior quarter and 2% lower year-over-year compared to Q3 2020. year-over-year primarily due to fewer patients being diagnosed and treated for ovarian cancer during the pandemic in the United States. Our experience is consistent with that of another quarterly call 16% 2019 monthly averages prior to the pandemic. Despite the continuing impact of COVID-19, based on the data available to us, we believe we have maintained our U.S. market share for Rubraca in the second line maintenance ovarian cancer setting and we continue to be European performance. We do believe when patients rise and the urgent need to manage this often fatal disease grows, the second line maintenance treatment of ovarian cancer will increase as will the use of Rubraca. Importantly, we see a larger potential for Rubraca in first line maintenance treatment of ovarian cancer. And we’ve continued to make significant progress in the advancement of our clinical trial program. Three Phase 3 data readouts for Rubraca are anticipated in 2022

[Dr. Tom Harding:]

Thanks, Pat. Hello. It’s a pleasure to speak to you today. As we’ve discussed on prior calls, emerging as a leader in targeted radionuclide therapy is a key strategy focus. FAP-2286, our lead targeted radio-therapeutic compound licensed as part of our ongoing collaboration with 3B Pharmaceuticals is the first peptide-targeted radiotherapy candidate, or PTRT, targeting fibroblast activation protein, also known as FAP in clinical development. And as Pat mentioned, 2022 has the potential to be transformational for this program. FAP is highly expressed on cancer-associated fibroblasts or CAFs, which represent one of the most abundant cell components in tumors that are found in the majority of cancer types. CAFs play a critical role in tumor initiation, progression, metastasis and therapeutic resistance. For example, recent non-clinical studies have demonstrated FAP expression in CAFs exhibit a potent immunosuppressive activity that can promote tumor progression and confer resistance to immune-based therapies such as PD-1 or PDL-1 blockade. At the recent AACR-NCI-EORTC conference in October, we were pleased to present non-clinical data that confirmed the high expression levels of FAP across multiple solid tumor types screened using immunohistochemistry. High FAP expression was observed in pancreatic ductal adenocarcinoma, salivary gland, mesothelioma, colon, bladder, sarcoma, squamous non-small cell lung, squamous head and neck cancers as well as cancers of unknown primary. In these tumor types, high FAP expression was detected in both primary and metastatic tumor samples and was independent of tumor stage or grade. The analysis also demonstrated that in most tumor types, FAP expression was predominantly localized to CAFs surrounding the tumor cells and integrated into the tumor microenvironment. In addition, in cancers of mesenchymal origin including sarcoma and mesothelioma, FAP expression was observed in tumor cells in addition to cancer-associated fibroblasts. These data support the investigation of FAP-2286 in multiple tumor types in the planned Phase 2 expansion cohorts of LuMIERE. As interest in FAP as a target increases and the field grows larger, we are pleased to be in a first mover position with FAP-2286 the first peptide-targeted radionuclide therapy tapping into the clinic and patients, as Lindsey would describe in greater detail. Clinically, we are focused on FAP-2286 monotherapy development in ongoing LuMIERE study. However, pre-clinically, we’re evaluating a number of FAP-2286 drug combinations. Given the role of FAP expressing CAFs in mediating resistance to new base therapies such as PD-1 or PDL-1 blockade, combination with these agents will be a priority. We are currently evaluating in non-clinical studies the efficacy and mechanism of action of FAP-2286 and a PD-1 monoclonal antibody in syngeneic mouse tumor models. In addition to immune checkpoint inhibitors, there are a number of publications reporting non-clinical data for the combination of targeted radiotherapy with PARP inhibitors to augment an efficacy. This makes sense, since radiotherapies work by causing DNA damage by radioactive emission. If this damage is not repaired, the cell will eventually die. One of the critical proteins for repairing radiation-induced damage is PARP and its inhibition augments efficacy in combination with multiple targeted radiotherapy agents. We’re currently preclinically evaluating the combination of FAP-2286 with our PARP inhibitor rucaparib in tumor models. Lastly, radiation is known to synergize with a number of agents currently approved as standard of care in specific candidates or indications. For example, gemcitabine, used as a first-line chemotherapy in pancreatic cancer and other carcinomas is a well-known radiosensitizer and could have utility in combination with FAP-2286. We’re currently performing a high throughput screening of approved oncology drugs in combination with radiation to identify promising combinations to 2286 development. We look forward to reporting results of this preclinical work at upcoming scientific meetings. To support our commitment to this emerging field, we have created educational materials about targeted radiotherapy. The first of these materials are microsite and an introductory video to provide more information about targeted radiotherapy, FAP-2286 and Clovis’ targeted radionuclide development program. To learn more, please visit targetedradiotherapy.com. I also want to quickly note that we have recently completed a clinical supply agreement with ITM that provides Clovis with ITM’s therapeutic radioisotope, no-carrier-added lutetium-177 EndolucinBeta, for use in the clinical development of FAP-2286 for the next five years, ensuring supply is integral to the success of this program. And we are pleased to have this agreement in place. Lastly, we’re collaborating with 3B Pharmaceuticals on a discovery program directed at three additional targets for targeted radionuclide therapeutic development to which we have global rights. We currently expect to file an IND for second candidate in this program in the second half of 2022. Now, I’ll turn the call over to Lindsey for a clinical update.

[Dr. Lindsey Rolfe:]

Thanks Tom. Good morning, everyone. I’m really glad to be here with you today to discuss the clinical programs and key clinical milestones across the portfolio. Rubraca, we’re expecting top line clinical data from ATHENA monotherapy arm in the first quarter of 2022, based on current event-based projections. Data from the combination arm of Rubraca plus Opdivo versus monotherapy are expected in the second half of 2022, based on our protocol-defined assumptions. As a reminder, ATHENA is a Phase 3 1,000-patient study in front-line newly diagnosed advanced ovarian cancer maintenance. With ATHENA, we believe we are uniquely positioned to evaluate Rubraca in terms of two independent outcomes

[Dan Muehl:]

Thanks, Lindsey, and hello everyone. We reported net product revenues for Rubraca of $37.9 million in Q3 2021 which included U.S. net product revenues of $28.7 million and ex-U.S. net product revenues of $9.2 million. Third quarter 2021 net revenues represent an increase of 3% over Q2 2021 and a 2% decrease compared to Q3 2020, in which we reported net revenues of $38.8 million, including net product revenues in the U.S. of $33.9 million and ex-U.S. $4.9 million. Clovis reported net product revenue for Rubraca of $112.8 million for the nine months ended September 30, 2021, which included U.S. product revenue of $88.1 million and ex-U.S. product revenue of $24.7 million, compared to net product revenue for the same period in 2020 of $121.2 million, which included U.S. net product revenue of $109.8 million and ex-U.S. net product revenue of $11.4 million. Gross to net adjustments totaled 27% globally in Q3 2021, compared to 28.6% in Q2 2021. Decreased discounts in the U.S. were the main driver. This metric fluctuates quarter to quarter, and it’s difficult to estimate our future revenues. But, the high 20% level seems likely, depending on the revenue and distribution mix for the U.S. and Europe. As previously discussed, as European revenues increase in proportion to the U.S., global GTN will increase correspondingly. Research and development expenses totaled $46.2 million for Q3 2021, down 27%, compared to $62.9 million for the comparable period in 2020, primarily due to lower spending on Rubraca clinical trials. We expect research and development expenses to be lower in the full year 2021 compared to the full year 2020. Selling, general and administrative expenses totaled $32.2 million for Q3 2021, down 17%, compared to $38.6 million for the comparable period in 2020, due to a decrease in personnel costs and share-based compensation expense, reduction in size of our U.S. commercial organization during the fourth quarter of 2020 and a decrease in legal expenses. Further, we expect SG&A expenses to decrease in 2021, compared to 2020. We reported a net loss for Q3 of $67.4 million or $0.56 per share, compared to a net loss for the third quarter of 2020 of $78.7 million or $0.89 per share. Turning now to a discussion of cash and debt. As of September 30th, we had $171.9 million in cash and equivalents. During the quarter, we raised $41.5 million in net proceeds through our at-the-market equity offering program, which has the capacity of 125 million shares of common stock. We also paid off in full at maturity the remaining $64.4 million in principal amount outstanding of our 2.5% convertible notes due in 2021. Our next convertible debt is not due for almost three years with a maturity of August 1, 2024 and conversion price is of $7.29 for a portion and $6.24 for the remainder. Also as of September 30th, we had drawn approximately $137.5 million under the Sixth Street Partners, LLC ATHENA clinical trial financing and had up to $37.5 million available to draw under the agreement to fund expenses of the ATHENA trial. We expect this $37.5 million to be mostly drawn down between Q4 2021 and Q4 2022. Net cash used in operating activities was $46.1 million for Q3 2021, down 15% or $8.3 million from the $54.3 million reported in Q3 2020. Cash burn in Q3 2021 was $35.5, down 6% from $37.7 million in Q3 2020. We have reduced both, our R&D and SG&A expenses considerably compared to prior years, most recently reduced R&D and SG&A expense by $23.1 million, or 23%. As you can see, we have aggressively reduced expenses and cash burn over the last year, and we will continue to have a strong focus on this moving forward. At this time, as will be disclosed in our Form 10-Q for the period ending September 30, based on our current revenue estimates, we have sufficient cash and available liquidity under our ATHENA financing agreement to fund our current operating plan for at least the next 12 months. However, mostly related to the continuing impact of COVID on ovarian cancer diagnoses, we cannot predict revenues with sufficient accuracy to provide cash guidance beyond that. This is consistent with what we stated last quarter. And as noted, we maintain our focus on cost controls and balance sheet management to mitigate the cash impact of Rubraca’s unpredictable revenue situation in this challenging environment. We believe there is adequate flexibility within our operating plan to adjust variations in our expected Rubraca revenues, and the availability and timing of potential sources of financing. Now, I’ll turn the call back to Pat.

[Patrick Mahaffy:]

Thanks, Dan. Despite these challenging times, we have set the stage for a very important year to come. During 2022, we’re on track to announce top line data for three Phase 3 Rubraca studies that offer the potential expansion and including a study that should definitively inform whether adding a checkpoint inhibitor to Rubraca therapy in the first-line maintenance treatment ovarian cancer setting extends Rubraca’s progression-free survival benefit. In addition targeted radiotherapy is significant and 2022 may be transformational for the program, if we present initial data for the Phase 1 LuMIERE study of FAP-2286, the first peptide targeted radionuclide therapy targeting FAP to enter clinical development. We intend to maintain our lead as we advance our Phase 1/2 study and begin our combination development program. These anticipated pipeline events and our continued progress on improving our balance sheet support our efforts to execute Clovis’ three core strategies, expand the Rubraca label to drive revenue growth; emerge as a leader in targeted radionuclide therapy; and achieve long-term financial stability. And with that, we’ll be happy to answer any questions you may have.

[Operator:]

Your first question comes from Cory Kasimov from JP Morgan.

[Gavin Scott:]

Hi. This is Gavin on for Cory. Thanks for taking our questions this morning. Just a higher level one on the radionuclide program. Interested to get your perspective on others joining the field and your thoughts on the strategy to get ahead and differentiate 2286. Thank you.

[Patrick Mahaffy:]

I’ll take a first shot at that, and then Tom and Lindsey may jump in, too. If any company has learned the benefits of being first and the disadvantages of being third is us, given our experience being third to market with Rubraca, which all of you have endured. As a consequence, we’re really informed by this and are actively pursuing an aggressive development program for 2286 that not only keeps us first, but keeps us first in multiple tumor types and keeps us first with the potential combinations that may add to the monotherapy benefit of 2286. We don’t know everything we need to know yet about this drug, but we know a couple of things for sure. We know it gets to the tumor, we know what stays in the tumor, and those are the two most important ingredients for an effective targeted radionuclide. So, as a consequence, we are optimistic about the importance of the target and the potential for our drug to address that target, hopefully with a significant and meaningful antitumor effect. Tom, do you want to talk about others in the field and what else is happening? What would you add to that?

[Dr. Tom Harding:]

Yes. Sure, Pat. As Pat mentioned, a core constituent of an effective targeted radionuclide therapy is the ability to stay in the tumor and persist, so the radioactive emissions can occur and cause cell death. We’re aware of 15-plus different agents in development targeting FAP. But, the major limitation of all of these drugs is they have a very low tumor retention time, based upon the way in which they target FAP. We’re using a fundamentally different approach for 2286, which is a constrained peptide ring, which is expertise of our partner 3B Pharmaceuticals, which gives us a differentiated preclinical profile in terms of tumor retention and also tumor -- antitumor efficacy compared to small molecule-based FAP radiotracers. So to begin with, we have a differentiated agent. And on top of that, what Pat said about trying to move first and maintaining our position is one of our core drivers. Anything else in addition, Lindsey?

[Dr. Lindsey Rolfe:]

Well, I’d just say that we’re quite uniquely positioned and that we are a small agile biotech company, but we’ve been around for a while. And our development clinical teams are very stable and very experienced. So, we are in a really good position to execute the clinical trials efficiently and fast.

[Operator:]

Your next question comes from Paul Choi from Goldman Sachs.

[Paul Choi:]

A couple of pipeline questions from me as well. First on FAP-2286. Can we expect that the patient population in LuMIERE will be relatively similar to what you’ve shown with your triple meeting poster here? And does the trial design allow for maybe more narrowing or specification of the patient population as you enroll patients?

[Patrick Mahaffy:]

Lindsey?

[Dr. Lindsey Rolfe:]

On the Phase 1 portion of the study, as you know, is not limiting the tumor type for the …

[Anna Sussman:]

Lindsey, could you repeat that? I think it faded out.

[Dr. Lindsey Rolfe:]

Okay. So, Phase 1 is there to evaluate safety, so we look at the broad population, and we don’t limit the number of tumor types. However, all patients must have a tumor that does express some FAP. The Phase 2 portion of the study, the expansion cohort, absolutely, we will use the information that Tom’s group has gathered to guide selection of the tumor cohorts as well as all other available data points from the literature and other emerging science. So, we will have a limited number of tumors in Phase 2, and we will pick tumor types based on scientific features and probability of success as well as taking potential unmet need and market size into account.

[Paul Choi:]

And maybe as a follow-up with regard to the potential data presentation for 2286 next year, could you maybe just clarify would that include both expansion cohorts or just the sort of dose escalation or tumor type population that you’re initially working on right now? And then, I had a follow-up question regarding lucitanib?

[Dr. Lindsey Rolfe:]

So, given the lead time for conference, publications, submission, et cetera, I would expect most data that we present next year to be based off of the Phase 1 part of LuMIERE, although, as we noted in the call, we do expect to start enrolling in Phase 2, by the end of 2022.

[Paul Choi:]

Okay. Thank you for that. And then, just quickly on lucitanib, I guess, you indicated that you’re still evaluating populations here. But, is there a view that you would potentially present the LIO-1 endometrial cohorts by year-end or will that be something to expect in 2022? Thank you very much.

[Dr. Lindsey Rolfe:]

Okay. Paul, just based on these conferences, I think it will be early in 2022, rather than this year for the data presentation from LIO and move in endometrial I think.

[Operator:]

We have no further questions in queue. I would like to turn the call back over to Anna Sussman for closing remarks.

[Anna Sussman:]

Great. Thank you. We thank everyone for your interest in Clovis today. If you have any follow-up questions, please contact me at 303-625-5022 or Breanna Burkart at 303-625-5023. This call can be accessed via a replay of our webcast at clovisoncology.com, beginning in about an hour. It will be available for 30 days. Again, we appreciate your interest and time this morning. Thank you, and have a good day.

[Operator:]

This concludes today’s conference call. Thank you for your participation. You may now disconnect.