Clovis Oncology, Inc.
Q4 2020 Earnings Call Transcript

Published: 23 Feb 2021

[Operator:]

Ladies and gentlemen, thank you for standing by and welcome to the Clovis Oncology 2020 Operating Results Webcast Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. I would now like to hand the conference over to Ms. Anna Sussman, VP of Investor Relations and Corporate Communications. Please, go ahead.

[Anna Sussman:]

Thank you very much. Good morning, everyone, and welcome to the Clovis Oncology fourth quarter fiscal year 2020 conference call. Thank you for joining us. You've likely seen this morning's news release. If not, it is available on our website at clovisoncology.com.

[Patrick Mahaffy:]

Thanks, Anna. Good morning and welcome, everybody. I appreciate your time today. We are pleased with our overall sales performance in 2020, given the ongoing effects of COVID-19 on patient diagnoses, patient visits and access to oncology practices, which began around March last year. Even now patient diagnoses were down approximately 15% in January this year compared to January 2020, based on data we've seen. We are not currently providing 2021 sales guidance as the ongoing effects and the timing of the recovery from COVID are difficult to predict.

[Thomas Harding:]

Thanks, Pat. Hello, all. I'm Dr. Thomas Harding. And it's a pleasure to speak with you today. As Pat has mentioned, we are very enthusiastic about our peptide-targeted radionuclide therapeutic program and in particular, our lead compound FAP-2286 which we expect to enter into clinical development in the next few months. Peptide-targeted radionuclide therapy uses cancer targeting peptides to deliver radiation-emitting isotope, specifically to tumors. When injected into a patient's bloodstream, the targeting peptide attaches to cancer cells, delivering high doses of radiation to the tumor while sparing normal tissue. Our lead compound, FAP-2286, which we licensed as part of our ongoing collaboration with 3B Pharmaceuticals is our first therapeutic candidate that targets fibroblast activation protein or FAP. FAP is highly expressed on cancer-associated fibroblasts or CAF which represent one of the most abundant cell components in tumors and are found in a majority of cancer types, potentially making a suitable target across a wide range of solid tumors including breast, lung, colorectal and pancreatic carcinomas. Cancer-associated fibroblasts play a critical role in tumor initiation, progression metastasis and therapeutic resistance. For example, recent studies have demonstrated the FAP expressing CAFs exert a potent immunosuppressive activity that can promote tumor progression and confer resistance to immune-based therapies such as, PD-1 and PD-L1 blockade. In certain cell types, such as, sarcoma and mesothelioma, FAP may also be expressed on the tumor cells in addition to the cancer-associated fibroblasts. FAP-2286 consists of two functional elements.

[Lindsey Rolfe:]

Thanks, Tom. Good morning. I'm glad to be here with you today to discuss some of the clinical milestones expected for Rubraca and Lucitanib in 2021. For Rubraca, we expect to announce top-line clinical data from the ATHENA monotherapy arm in the second half of 2021 although exact timing is dependent on achieving the required number of PFS events. 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, as monotherapy versus placebo in the first-line maintenance setting in the HRD population inclusive of Rubraca and in the all-comers or intent-to-treat population as well as any potential advantage of the combination of Rubraca and Opdivo in the same patient population. ATHENA is the first frontline switch maintenance study designed to evaluate both PARP monotherapy versus placebo and PARP PD-1 combination therapy versus PARP monotherapy in one study design. I'll take a moment to review the statistical analysis plan to ATHENA. First, expected in the second half of 2021, we will see the results of Rubraca monotherapy versus placebo in all study populations. And then probably a year or more later we will see the results of Rubraca plus Opdivo versus Rubraca monotherapy in all study populations. In each of these analyses, we will first evaluate outcomes in the HRD population including Rubraca and then step down to the entire intent-to-treat population. We believe this study offers an opportunity to truly differentiate Rubraca in the first-line maintenance setting. As I mentioned earlier, the ATHENA readouts are dependent on the timing of data maturity driven by PFS events. Once top-line results are available, we would plan to file an sNDA shortly thereafter. Continuing with these potential 2021 milestones for Rubraca, the LODESTAR study our Phase 3 pan-tumor study to evaluate Rubraca in homologous recombination repair genes including BRCA across tumor types continues to enroll patients.

[Dan Muehl:]

Thanks, Lindsey, and hello, everyone. We reported net product revenues for Rubraca of $43.3 million for Q4 2020, which included US net product revenues of $36.4 million and ex-US net product revenues of $6.9 million. This includes sequential quarterly growth in net revenues from our prostate indication in the US from Q3 to Q4 of 2020. Fourth quarter 2020 net revenues represent a 10% increase over Q4, 2019, in which we reported net revenues of $39.3 million, including net product revenues in the US of $36.1 million and ex-US of $3.2 million. For fiscal year 2020, we reported global net product revenues for Rubraca of $164.5 million compared to $143 million in fiscal year 2019, an increase of 15%. For 2020, this included US net product revenues of $146.3 million and $18.2 million ex-US compared to 2019, which totaled $137.2 million and $5.8 million in the US and ex-US respectively. Sequentially, net product revenues increased 12% from Q3 to Q4 2020, including an 8% increase in US net revenues and a 39% increase in ex-US, which is encouraging given the effects of COVID-19 in our sales, which remain difficult to predict. For this reason, as Patrick noted, we are not providing 2021 sales guidance at this time. Gross to net adjustments totaled 25.6% globally in Q4 2020 compared to 25.1% in Q3 2020 relatively flat from last quarter. Gross to net was 23.3% globally for the full year. This metric fluctuates quarter-to-quarter and is difficult to estimate on future revenues. But a range in the mid to high-20% seems likely depending on the revenue and distribution mix between the US and Europe. As European revenues increase in proportion to the US global gross to net will increase correspondingly. Additionally, free goods percentage in the US sales decreased from 20.9% in Q3 to 19.1% in Q4 and weeks of distributor inventory increased slightly at the end of Q4 versus Q3. Research and development expenses totaled $56.7 million for Q4, 2020 and $257.7 million for fiscal year 2020, down 22% and 19% 9% respectively compared to $72.5 million and $283.1 million for the comparable periods in 2019. Research and development expenses decreased for the quarter and year compared to the same periods in the prior year due primarily to lower spending on Rubraca clinical trials. We expect research and development expenses to be lower in the full year 2021, compared to full year of 2020. Selling, general and administrative expenses totaled $40.8 million for Q4 2020 and $163.9 million for fiscal year 2020, both down 10% compared to $45.2 million and $182.8 million for the comparable periods in 2019. Selling, general and administrative expenses decreased during the quarter and the year, compared to the same periods in the prior year with savings due to the COVID-19 situation globally and overall cost reduction efforts. Further, we expect SG&A expenses to decrease in 2021 compared to 2020. We reported a net loss for Q4 of $99 million or $1.02 per share, compared to a net loss for the fourth quarter of 2019 of $99.5 million or $1.81 per share. We reported a net loss for the full year of 2020 of $369.2 million or $4.38 per share, compared to a net loss of $400.4 million or $7.43 per share for full year 2019. Net loss for Q4 and fiscal year 2020 included share-based compensation expense of $12 million and $50.8 million compared to $12.6 million and $54.3 million for comparable periods of 2019. Turning now to a discussion of cash. As of December 31st, we had $240.2 million in cash and equivalents. And as of December 31st, we had drawn approximately $100 million under the Sixth Street Partners LLC, ATHENA clinical trial financing and had up to $75 million available to draw under the agreement to fund the expenses of the ATHENA trial. Based on the company's anticipated revenue spending available, financing sources and existing cash and cash equivalents, we believe we have sufficient cash and cash equivalents to fund our operations in early 2023, including any cash repayment unless financed earlier of the remaining $64.4 million aggregate principal amount of the 2.5% convertible notes at their maturity in September of 2021. Cash burn in Q4 2020 was $40.9 million, down 27% from the Q4 2019 quarter cash burn of $56.3 million. Cash burn for the 12 months ended December 31, 2020 was $195.6 million, down 36% from the 12 months ended 2019 cash burn of $304.7 million. As we have been saying and working on for the last year and longer, we have reduced both our R&D and SG&A expenses considerably compared to prior years. These efforts combined with our increasing revenues and lower inventory purchases and milestone payments on product approvals have significantly reduced our cash burn in 2020 over 2019 and we expect this trend of lower cash burn to continue in 2021. One last point. You will see in the next day or so that we have filed a shelf registration statement for up to $200 million. We do not have any immediate plans to conduct an offering under the shelf. And in any case the registration statement would have to be declared effective by the SEC before we could sell any securities under it. So this is an important housekeeping measure common for biotechnology companies and intended to provide us flexibility in the future. Now I'll turn the call back to Pat.

[Patrick Mahaffy:]

Thanks Dan. Despite the evident challenges related to the global pandemic in 2020, we are pleased with Rubraca's sales performance during the year. With the recently announced changes to our U.S. commercial strategy, we believe we are well-positioned for growth especially when the ongoing impact of COVID-19 is behind us. Our development pipeline progress achieved in 2020 positions us for several key clinical, development and regulatory milestones in 2021, which include the planned initiation of LuMIERE the Phase 1/2 clinical study for FAP-2286, a peptide targeted radionuclide therapeutic candidate in the first half of 2021, top line Rubraca monotherapy versus placebo data from the ATHENA study in the front lines for treatments in ovarian cancer setting in the second half of 2021, initial efficacy data from the Phase 2 portion of the LIO-1 combination study of lucitanib and Opdivo at 2021 medical meetings, sufficient data from the Rubraca LODESTAR potential filing for a targeted gene in tumor-agnostic supplemental NDA. And as Dan pointed out, we remain focused on disciplined cost control and as an example of this commitment we reduced our cash burn from 2020 -- in 2020 from 2019 by 36% and we anticipate that our cash burn will be still lower in 2021 than in 2020. Finally based on current revenue and expense forecasts, we believe we have sufficient resources to fund our operations into early 2023. Thanks for joining. And with that, we will be happy to answer any questions you may have.

[Operator:]

First question comes from Cory Kasimov with JPMorgan.

[Cory Kasimov:]

Hey, good morning guys. Thank you for taking the questions. I wanted to ask on the FAP program. And can you talk about the kind of potential combination approaches you believe hold the most biologic rationale? And kind of on that front, how much of the development do you expect to be focused on the monotherapy side of things versus advancing into combinations? And I have one follow up.

[Patrick Mahaffy:]

I'm going to turn that over -- and you have a follow-up. So Tom why don't you take that?

[Thomas Harding:]

Hello, Cory. Thanks for the question. The majority of our work in LuMIERE will be all focused on the monotherapy. So once you find the dose and then move into Phase 2, we will move into at least five different expansion cohorts all that will focus on FAP-2286 as a monotherapy. But in addition to the monotherapy data, there is a compelling therapeutic rationale for us to combine with PD-1 or PD-L1 blockade given the role of cancer associated fibroblasts in driving immunosuppression. And in addition to that, there are some other combinations that make sense, potentially including a combination with our own PARP inhibitor with Rubraca. The DNA damage caused by radiation is repaired in some cases by PARP-related pathways and may be augmented. And this obviously is the focus of some ongoing Phase 1 studies with alternative PARP inhibitors in Australia. So I think PD-1 rises to the top of our list, but there are other candidates that we are considering.

[Cory Kasimov:]

Okay. That's helpful. And then the follow-up question is just for the pan-tumor LODESTAR study. What will determine whether this is ultimately registrational? Is it the number of tumor types across which you show efficacies, or is it just the efficacy overall no matter how many tumor types that's demonstrated in? Thank you.

[Patrick Mahaffy:]

Yeah, Lindsey?

[Lindsey Rolfe:]

I think it will be a bit of both. We need to show activity across a range of tumor types where Rubraca isn't already indicated for those genes. But also there will be a threshold response rate. There'll be a level of activity that we'll have to demonstrate as well for acceptability by FDA. So it will depend on both of those things and don't forget perhaps has more complexity because we're also looking across five separate genes.

[Cory Kasimov:]

Great. Okay. Thank you for taking the questions.

[Patrick Mahaffy:]

Thanks, Cory.

[Operator:]

Next question comes from Ed White with H.C. Wainwright.

[Ed White:]

Good morning. Thanks for taking my questions. So just on Rubraca sales in prostate, you said you had modest growth. I'm just wondering what are the -- how should we be thinking about the penetration in that market? And what perhaps are you seeing for sticking points in prostate?

[Patrick Mahaffy:]

Yeah. So there are issues we face given the breadth of the label that AZ achieved including the multiple mutations where they didn't even have data. And of course this has been earlier line of therapy. Now we do have NCCN guidelines that allow for reimbursement in patients who can't tolerate or for whom chemotherapy would be inappropriate. But we have a disadvantage. And that disadvantage will likely continue until the completion and submission of the TRITON3 data which is earlier line and broader than BRCA does include ATM patients. And we would anticipate data from that trial next year. The -- in the short term though, we have a focused group calling on both urologists well virtually calling on both urologists and medical oncologists. Participants in the trial have been active prescribers because of their experience in the trial. And we do anticipate growth will continue albeit off a relatively small base.

[Ed White:]

Okay. Thanks, Pat. And perhaps just a second question on the FAP-2286. Once the study starts, I believe you had said that, you expect to have data within 12 months. Could -- is it possible to see some interim data from the Phase I this year, or are we looking for data to be a 2022 event?

[Patrick Mahaffy:]

Yes. I would say any formal presentation at a scientific meeting is going to be next year, right? I don't anticipate that we would have a sufficient data set, maybe a trials-in-progress type thing, but that doesn't include data from the trial. Given the interest in the program, we are aware that people are going to want to get some sense of how we're doing. We haven't perfectly decided how we'll do that. But I would imagine we'll provide directional reviews on our quarterly calls, once the trial begins and we've enrolled sufficient number of patients to be able to describe to some extent general tolerability and the events or any evidence of activity.

[Ed White:]

Okay. Thanks, Pat. And then, just my last question on the LIO-1 study, you're looking to present interim data at medical meetings this year. I'm just wondering, if it's perhaps possible to see the combination with Opdivo in ovarian as early as ASCO with endometrial later in the year by ESMO, is that a reasonable possibility for timing?

[Patrick Mahaffy:]

We've submitted an abstract for ASCO. It's up to them of course to accept it. But we submitted an abstract on the ovarian arm, the serious ovarian arm. So hopefully, we'll be able to present initial data from the ovarian arm. Right now, we are anticipating submitting the endometrial which is rolling a little bit slower than the ovarian to ESMO. So that's our thinking right now.

[Ed White:]

Okay. Thanks, Pat.

[Patrick Mahaffy:]

You bet.

[Operator:]

Next question comes from Paul Choi with Goldman Sachs.

[Charlie Ferranti:]

Hi everyone. Good morning. Thank you, so much for taking our question. This is Charlie on for Paul. I just had a quick question on FAP as well. Talking about the LuMIERE study with the PET imaging program, to start, you're talking about identifying these patients with the gallium isotope imaging modality. Do you see -- foresee going forward, that you would continue identifying eligible patients on a patient-to-patient basis in this way, or is this sort of a way of identifying target tumor types that you would then kind of use as a blanket sort of way of identifying patients going forward? Thank you, so much for taking our question.

[Patrick Mahaffy:]

Tom, I'll take a first crack at this and then you follow-up or correct anything I said. For the Phase I and the expansion cohort so for the entirety of the Phase I/II, we anticipate screening every patient, with a gallium labeled 2286. It is the practice of those in nuclear medicine. I don't know how many times I've heard physicians tell me that, we see what we treat and we treat what we've seen. So, it is an embedded practice to image first treat second. And that of course is how PSMA-617 if approved and it will ultimately be approved and similarly that's true today for the approved radionuclide Lutathera. Whether its gallium however, remains to be seen. We are evaluating copper as an imaging modality. And we are considering even other modalities that might be a little easier that is have a little longer half-life than gallium, which has a half-life of 68 minutes which is complicated. So, it has been gallium-based imaging that is the basis for both lutetium -- Lutathera and PSMA-617. Tom?

[Thomas Harding:]

That was perfect. I have nothing to add.

[Charlie Ferranti:]

Thank you, very much guys.

[Patrick Mahaffy:]

You bet.

[Operator:]

Next question comes from Tazeen Ahmad with Bank of America.

[Tazeen Ahmad:]

Hi, good morning. Thanks for taking my question. Pat, maybe a couple for me. The first one is, with regards to your expectations of sales for the year and appreciating the impact of COVID, is it your view that if we do move back to a more normal environment as the year progresses that you would be in a position to maybe offer up some sales guidance later in the year? And then the second question I have is, as it relates to ATHENA you talked about the benefits that you would incur from having a broader label especially as it relates to competing with other approved PARPs. But I guess from your vantage point do you think that physicians as long as the study data was positive, physicians would be in a position to appreciate that label change immediately, or would that require any kind of education? Thank you.

[Patrick Mahaffy:]

Yes. To answer the question of guidance, we may. And we did talk about even including that in the script that we will evaluate that over the course of the year. We are well aware that investors and the investment community would prefer that we provide guidance. If we become comfortable as early as next quarter or in the middle of the year during the second quarter call that we had pretty good visibility, we would definitely consider providing it later in the year. So that's one. Two, with regard to frontline maintenance. There were hundreds of participants in our trial in the US. It's a well-known -- it's well-known amongst the community that we run the ATHENA trial that is fully enrolled and they expect data. We'll publicize top line data, we anticipate in the second half of this year. And we are confident that just as we did third to market in the second-line maintenance, we ultimately got to a 20% to 25% share which we hold. We are hoping the hybrid model allows us to change some habits of targeted subscribers away from prescribing olaparib or Zejula and drive toward more experience with Rubraca. And to the extent that we create more habitual Rubraca prescribers that would be extremely helpful to us over the course of this year as we prepare for launch into top line maintenance next year. So yes, there will be education will depend on data of course. But I anticipate we will be at least as competitive in the frontline setting as we are in the second line setting.

[Tazeen Ahmad:]

Okay. And then would you expect any increase in SG&A, if you start promoting for frontline?

[Patrick Mahaffy:]

There may be some -- a modest spike in marketing expenses to support the launch. We would not anticipate knowing what we know right now an increase in personnel other than maybe a small number of office-based people related to marketing. But I don't think it would be very visible to you. We would not anticipate a huge increase. It's mainly talking about the data. Rubraca is pretty well-known in the community that we'd be selling to. And of course, the frontline prescribers are exactly the second line prescribers.

[Tazeen Ahmad:]

Great. Okay. Thank you.

[Operator:]

We have a question from Joe Catanzaro with Piper Sandler.

[Joe Catanzaro:]

Hey, guys. Thanks for taking my questions here. So Pat you mentioned that patient visits and diagnoses are still down. Just wondering if you've seen a differential impact from that when you compare the maintenance versus treatment setting especially when we think about getting physicians to move away from watch and wait?

[Patrick Mahaffy:]

I don't think it's as different as I would like. Patients are missing office visits to a lesser extent now, but are still missing office visits. And this isn't only in oncology. I'm sure if you follow cardiovascular companies or others just visits of patients to physician practices, to hospitals is broadly down as people are nervous enough about the risks of COVID that they reduce their concern about underlying chronic medical issues. We launched a campaign at the time of -- when COVID started and this was probably in April or May now called Maintenance Matters where we actively try to get physicians to reconsider maintenance those who have continued to practice in all or some of their patients watch and waitMeaning that we can keep them out of the clinic for far longer, keep them away from immunosuppressive therapy for far longer, if they go on maintenance rather than watch and wait which is effectively placebo which is effectively five months before you're on your next round of chemo. It had some modest success. We do get some good reaction to it. It's why we moved to this hybrid model. It was pretty hard to make it actionable when we were not -- where we have no access to clinics either in Europe or in the United States. That is a part of the digital campaign. Hopefully it will remind people that maintenance is not only an appropriate option, but it is -- in the time of COVID and then any time in our view supported by data that suggests it's a far better approach to patient management than watch and wait. I did note that in the presentation, I think it was by GSK about the due in frontline maintenance setting date. They referred again to the vast number of patients who are still being treated now in the frontline setting with watch and wait. So it is an issue that has plagued the class. It appears that it will continue to plague the class for a while including the frontline setting. So I don't know if I exactly answered your question but I don't -- things are recovering I think they'll continue to recover over the course of this year. Practices have adapted to COVID they have adapted to telemedicine. So it's not as if things are as bad now as they were in April and May, despite the surge that occurred in December January. But it's -- I don't think we'll be fully back to whatever normal is until the second half of this year.

[Joe Catanzaro:]

Okay. Got it. That is helpful. And if I could just ask a follow-up maybe a little housekeeping question. Can you remind us of whether the ATHENA readout you expect later this year for Rubraca versus placebo would trigger anything with regards to the ATHENA financing agreement and repayment?

[Patrick Mahaffy:]

No. It's the approval that would trigger that Dan right?

[Dan Muehl:]

Exactly. Yes. Yes. And we - the repayment starts regardless of the approval time frame in the fourth quarter of '22. So it's just a matter of -- the only thing that gets affected by approval is how much the payment could possibly be.

[Joe Catanzaro:]

Okay, got it. Thanks so much for taking my question.

[Operator:]

And at this time I'll turn the call over to Ms. Sussman for closing remarks.

[Anna Sussman:]

Great. Thank you, Sharon. We thank each of you today for your interest in Clovis. If you have any follow-up questions please call me at [phone] or Breanna at [phone]. This call can be accessed via a replay of our webcast at clovisoncology.com beginning in about an hour and it will be available for 30 days. Again we appreciate your interest and time. Thank you and have a good day.

[Operator:]

This concludes today's conference call. You may now disconnect.