Clovis Oncology, Inc.
Q3 2017 Earnings Call Transcript

Published: 2 Nov 2017

[Operator:]

Good day, ladies and gentlemen and welcome to the Q3 2017 Clovis Oncology Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] I would now like to turn the call over to Breanna Bukart, Vice President of Investor Relations and Corporate Communications. Please go ahead.

[Breanna Burkart:]

Thank you. Good afternoon, and welcome to our third quarter 2017 conference call. You should have received the news release announcing our financial results. If not, it is available on our website at clovisoncology.com. As a reminder, this conference call is being recorded and webcast. Remarks may be accessed live on our website during the call and will be available in our archive for the next several weeks. The agenda for today's call is as follows

[Patrick Mahaffy:]

Thanks, Breanna. Welcome, everybody. Thanks for joining us. I'll start with an update on the launch of Rubraca. We're pleased with our third full quarter of sales for Rubraca, which, as you know, was approved on December 19 last year by the FDA as monotherapy for the treatment of patients with deleterious BRCA mutation associated advanced ovarian cancer, who have been treated with 2 or more chemotherapies. We achieved $16.8 million in net sales during the third quarter. As noted in the news release, this does not include $4.4 million in commercial value provided to eligible patients as free drug supply through a payer systems program during the quarter. This is not unique for Rubraca, and then we'll discuss this trend in greater detail later in the call. Through the third quarter, approximately 1,100 new patients initiated therapy, and over 800 health care providers have prescribed Rubraca. These sales in the quarter represent the third consecutive quarter of growth in a rapidly evolving ovarian cancer market, which I'll describe briefly. At the time of the launch, Rubraca became the second PARP inhibitor approved for later line treatment for patients with mutations of BRCA. From the second and third quarters of this year, the first PARP inhibitors indicated for the second-line maintenance treatment setting were approved in all-comers, importantly, with no requirement for diagnostic testing. As a result of data in the 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 for the PARP inhibitor. Importantly, based on results from the ARIEL3 study, we believe Rubraca will be highly competitive in addressing that maintenance population once approved by the FDA. We are very enthusiastic about these data, and I'll provide more update on the supplemental NDA currently under review by the FDA shortly. While we will be limited to a smaller population of addressable mutant BRCA patients until our potential maintenance approval next year, we believe our strong performance to date reflects the general confidence prescribers are gaining with Rubraca as their experience and familiarity with this clinical profile increases. The clinicians who are using Rubraca today, of course, are the same clinicians who will prescribe it upon the potential approval of a broader maintenance label. As a reflection of this clinical population, the shift to a majority of nonacademic-based prescriptions has occurred, and for the third quarter, 25% of Rubraca prescriptions were from academic institutions and 75% through nonacademic-based practices. We believe that this reflects the percentage of prescriptions from academic and nonacademic-based practices that we can expect going forward. Overall, we're pleased with the first 3 quarters of the Rubraca launch despite the headwinds resulting from the adoption of the second-line maintenance indication in the U.S. ovarian cancer community. I should also note that sales trends are stable to up, which we believe will continue until the potential 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 great data from ARIEL3, we believe Rubraca will compete well upon potential approval for a second-line maintenance indication during the first half of 2018. I'll turn now to discussing both ARIEL3 and our regulatory progress to date for both the U.S. and Europe. The highlight of the third quarter is, of course, the presentation of the comprehensive ARIEL3 data set at ESMO in September, followed days after by the publication in the Lancet. I'll review the highlights but not in great detail, which will also be presented again this coming Monday, November 6, by Professor Jonathan Ledermann at ESGO in Vienna, and the presentation will be available in the Scientific Presentation section of our website as of the time of presentation. To remind you, ARIEL3 is a randomized double-blind study comparing the effects of rucaparib against placebo to evaluate whether rucaparib, given as maintenance treatment to platinum-sensitive patients, can extend the period of time for which the disease is controlled after a partial or complete response to platinum-based chemotherapy. The ARIEL3 study successfully achieved its primary endpoint but improved progression-free survival by investigator review in all 3 primary efficacy analyses

[Daniel Muehl:]

Thanks, Patrick, and good morning, everyone. Our third quarter 2017 financial results are included in this afternoon's press release. I'll review the highlights of the financial results and provide some additional commentary. Net product revenue is $16.8 million for the third quarter of 2017 and $38.5 million for the first 9 months of 2017. The supply of free drug represented an additional $4.4 million in commercial value during the quarter and an additional $9.4 million in commercial value for the first 9 months of 2017. The supply is approximately 20% of overall commercial supply in the quarter. The vast majority of these patients, over 90% are Medicare patients. Since foundation support for uninsured and underinsured is not available to the extent that has been in previous years, a larger number of patients are seeking assistance through other means, including companies' patient assistance programs. We understand that this experience is consistent with that of other manufacturers. We expect the supply of free drug to remain in this range for the foreseeable future. We ended the third quarter with $628 million in cash, cash equivalents and available-for-sale securities. Cash used in operating activities was $45.8 million for the third quarter of 2017 and $195.3 million for the first 9 months of 2017. This compares with $60.3 million and $212 million for the comparable periods of 2016. We reported a net loss of $60.7 million or $1.24 per share for the third quarter of 2017 and $294.5 million or a net loss of $6.39 per share for the first 9 months of 2017. This compares to $65.7 million or $1.70 per share and $278.4 million or $7.24 per share for the comparable periods in 2016. The net loss for the 9 months ended June 30, 2017, included a charge of $117 million related to our legal settlement. The net loss for the 9 months ended June 30, 2016, included a charge of $104 million for the impairment of an intangible asset, a gain of $25.5 million for a reduction in fair value of contingent purchase consideration and a $29.2 million non-cash tax benefit related to lucitanib product rights recorded in 2013 in connection with the company's acquisition of Ethical Oncology Science S.p.A. The adjusted net loss, excluding these items, was $60.7 million or $1.24 per share for the third quarter and $177.5 million and $3.85 per share for the 9 months ended 2017 and $65.7 million or $1.70 per share for the third quarter of 2016 and $228.5 million or $5.95 per share for the 9 months ended 2016. The net loss for the third quarter of 2017 include share-based compensation expense of $12.6 million and $32.2 million for the first 9 months of 2017 compared to $9.2 million and $29.7 million for the comparable periods of 2016. Our third quarter 2017 R&D expenses totaled $38.9 million and $104.5 million for the first 9 months of 2017. This compares to $54.3 million and $196.7 million for the comparable periods in 2016. The decrease year-over-year is primarily due to lower spending on rucaparib and rociletinib development programs and classifying as selling, general and administrative certain expenses related to the commercialization of Rubraca that had been classified as research and development prior to FDA approval. Selling, general and administrative expenses totaled $35 million for the third quarter and $100.4 million for the first 9 months of 2017. This compares to $9.2 million and $28.5 million for the comparable periods in 2016. The increase year-over-year is primarily due to classifying as selling, general and administrative expenses related to the commercialization of Rubraca that had been classified as research and development prior to FDA approval. Now I'll provide some further color on Rubraca from a finance perspective. We distribute our product principally through a limited number of specialty distributor and specialty pharmacy providers. These customers subsequently resell our products to patients and health care providers. Separately, we have arrangements with certain payers and other third parties that provide for government mandated and privately negotiated rebates, charge-backs and discounts. As previously noted, net product revenue was $16.8 million for the quarter. Revenue was recorded net of estimated rebates, charge-backs, discounts and other deductions as well as estimated product returns. These gross to net adjustments totaled approximately 7% of gross revenue for the quarter. As revenues rise, the gross to net adjustments are expected to remain in the high single digits as a percentage of gross revenue as the year progresses, assuming that the distribution and payer mix remain consistent. We only recognize revenue on product sales once the product is shipped to the patient or health care provider by the specialty distributor or specialty pharmacy provider. Our distribution mix for the quarter was approximately 76% specialty pharmacy and approximately 24% specialty distributer, consistent with our expectations. And our payer mix was 61% commercial, 29% Medicare and 10% Medicaid and other, also consistent with our expectations. Cost of sales for the quarter ended September 30, 2017, was $3.4 million or approximately 20% of net revenue and consist of costs associated with the sale of Rubraca, mainly freight, royalties and amortization of capitalized acquired intangible license right and milestone payments related to Rubraca. Based on our policy to expense costs associated with the manufacture of our products prior to regulatory approval, certain of these costs of Rubraca recognizes revenue during the year ended December 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 the cost of sales to remain generally consistent in relation to product revenues as we deplete these inventories and amortize the capitalized acquired intangible rights and milestone payments related to Rubraca. We expect to use the remaining pre-commercialization inventory for product sales in 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 will have the impact of lowering R&D expenses on a comparable period basis from 2016 to 2017. Clinical trial expenses will ship in composition in 2017 as well, with the completion of all rociletinib trials and the winding down of ARIEL2, ARIEL3 and Study 10 for rucaparib, the ongoing TRITON2, TRITON3, ARIEL4 and other company-sponsored and investor - investigator-initiated trials Pat mentioned earlier will begin to add to higher levels of spending as 2017 progresses. Now I'll turn the call back over to Pat.

[Patrick Mahaffy:]

Thanks, Dan. This is a very busy time at Clovis, with several meaningful activities for Rubraca underway. Our initial treatment launch of Rubraca is proceeding well and provides the opportunity to build awareness and experience with Rubraca in the near term. Our supplemental NDA for rucaparib is maintenance treatment for patients with platinum-sensitive recurrent ovarian cancer as on file with the FDA, which, based on the ARIEL3 data set, we anticipate will enable us to address the needs of a much broader population of women with ovarian cancer in the U.S. in 2018. An anticipated CHMP opinion for rucaparib in the treatment setting before the end of this year, followed by a potential EU approval early next year. We plan to follow this in the very near term with the variation to the MAA filing for a broad maintenance treatment indication. And our prostate - robust prostate cancer development program is well underway enrolling patients, working on specific mutations of BRCA, ATM and other HRD genes with the potential path to accelerated approval. Our collaboration with Bristol-Myers Squibb is underway, including 2 Phase III studies and a 1 Phase II study evaluating rucaparib and nivolumab in combination to commence by early 2018 in ovarian, triple-negative breast and in advanced prostate cancers by the end of this year. This combination could potentially provide a foundational therapy in these and other tumor types. And last but not least, a late-breaking oral presentation by Professor Jonathan Ledermann of the ARIEL3 data set at ESGO in Vienna, Monday, November 6, presenting the results to a broad population of gynecologic oncology health care providers. And with that, I'll be happy or will be happy to answer any questions you may have.

[Operator:]

[Operator Instructions] Our first question is from Alethia Young with Credit Suisse. Your line is now open.

[Alethia Young:]

Hey, guys. Thanks for my questions. Congrats on the progress throughout the last couple of months that we've last talked. I just want to get your perspective on two things. One, around the AstraZeneca second-line label. Just kind of talk through what point do you think will be the kind of key counter detailing points, like any kind feedback or color you've heard in the field. And then second one, just, I guess, can you just - Patrick, maybe [indiscernible] a little bit more on like kind of the PARP positioning that you see in the prostate market, and generally, you have a fair amount of studies ongoing. But I just want to see how you kind of think PARPs ultimately end up there, maybe more from a strategic perspective? Thanks.

[Patrick Mahaffy:]

Yes. So first, with regard to the AstraZeneca label. I won't go into a ton of detail, but the reality is, they did get their approval based on Study 19, which was a Phase II trial that had failed to receive an approval several years ago. And in that trial, the data show in the all-comers population a medium progression-free survival of 8.4 months compared to 5-point-something months, I forget the number exactly, which is far more modest than the differential seen in our trial, which presumably would end up in the label, as determined by both investigator-assessed and independent-assessed reviews of the data. So I think if we're proving anything here is that labels matter and that we have currently a more limited label. But based on the ARIEL3 data, we are going to have it accepted and approved by FDA as it was presented, and we would anticipate it would be. Some real advantages in terms of the data set that came out of this robust, largest maintenance trial of a PARP inhibitor ever conducted in ovarian cancer and the only one conducted in what could be considered a true real-world population with a more normal distribution of PRs than CRs and for our competitors. So that was probably a little more detailed than I meant I was going to say. But we're obviously anxiously awaiting the opportunity to go out and tell our ARIEL3 story, which we can't tell right now. But it is a great story. With regard to prostate, the data sets that exist in prostate, including the De Bono [ph] publication, including the limited amount of data that exist, in this case, for olaparib with Durba [ph] show some pretty exciting data emerging in terms of activity at a minimum in the BRCA, ATM and other HRD genes, and that represents 25% or so of men with advanced prostate cancer. And then secondly, our preclinical data supported by 4 or 5 patients who have gone on rucaparib with advanced prostate disease and done very, very well are really encouraging to us about the opportunity to address this population with rucaparib, which is why we have the robust program underway. The Durbid [ph] data look as if the opportunity, when combined with I-O, may extend the benefit beyond those patients with BRCA mutations, and that's why we're so excited about the collaboration with Opdivo, because a part of that prostate cancer trial that they will run will include patients who are biomarker negative. So we're going to learn a lot about prostate. We're obviously very excited about the potential for rucaparib in this large population of men who have a pretty difficult disease but may have a treatable disease because of these mutations.

[Alethia Young:]

Okay. Thanks.

[Operator:]

Our next question is from Tazeen Ahmad with Bank of America. Your line is now open.

[Tazeen Ahmad:]

Good afternoon. Thanks for taking my question. So, Pat, I wanted to ask you in terms of what the unrecognized revenue for Rubraca this quarter was, if you have that available.

[Patrick Mahaffy:]

With the unrecognized - we don't have any unrecognized revenue. So we - so again, we did call out, as Dan alluded to and as I alluded to, the fact that we gave away the 20% of our entire commercial supplies as free goods. So that's not formally unrecognized revenue. But I think you understand this, we don't report our sales to wholesalers or to the specialty pharmacies. We only report sales when drug is shipped to a patient. So we only have recognized revenue. Dan, that's...

[Daniel Muehl:]

Yes, that's correct.

[Tazeen Ahmad:]

Okay. So we got that cleared up. One question I have regarding your expectation for use in the treatment setting versus maintenance, say, in 2018 and beyond. If FDA's trend of approving drugs are coming up with an answer for an application before PDUFA continues, presumably, you'd be able to hear about a label expansion in early 2018. And if that's the case, realistically, what proportion of sales going forward do you think will be coming from the treatment setting versus maintenance?

[Patrick Mahaffy:]

So I think that by the end of 2018, at least 80%, if not higher, of our sales are going to be formally in the maintenance setting. If this market has evolved formally rapidly, then it is common in oncology markets to adopt maintenance therapy. We are very confident that ARIEL3 will be a meaningful and active competitor in that space. And I think that we're going to see far more use to 80% or more in the maintenance setting than in the treatment. It's important to note that in these advanced patients, of course, there's a gray zone here about it. Is it maintenance or is it treatment? And one of the reasons - and one of the things that physicians have reacted incredibly positively to about our trial is the fact that we showed responses in patients who had only achieved a PR in their most recent platinum-based therapy. And that opportunity to take a PR to a CR, particularly in the women with BRCA, is a huge advantage that fairly uniquely we showed in this prospective endpoint that was in our study. It just goes to show that while we would be formally prescribing the maintenance setting, we also are filling a treatment effect in women who had residual tumor from their most recent round of therapy.

[Tazeen Ahmad:]

Okay. And then the last question I have is, when do you think we could view some data from the TRITON2 study, initial data?

[Patrick Mahaffy:]

Yes. I had a feeling we were going to get asked this question. So we are committed to showing it at one of the meeting [Technical Difficulty]

[Tazeen Ahmad:]

Sorry. I couldn't hear your answer…

[Patrick Mahaffy:]

Do you have her cell phone number to set you up?

[Breanna Burkart:]

We can text her. Just checking to see if people can hear us again. Okay. Tazeen, is that you? Or are you do you want to...

[Tazeen Ahmad:]

Yes, if you can hear me, it is me. I literally got caught off as soon as Pat started answering the question.

[Patrick Mahaffy:]

So I'll answer it again. And apologies, there were some technology failure. So we are committed to showing data from TRITON2 at a medical meeting next year. It will either be, pending acceptance of it, at either ASCO or one of the fall meetings. And the driver will be, while we are completely committed to showing the data we want to, we want to make sure [indiscernible] data set that it can be easily interpreted. And so yes, the TRITON2 next year, ASCO or presumably ESMO in September.

[Tazeen Ahmad:]

And just based on what you know about the pace of enrollment, how much data could that be on a number of months on therapies' front?

[Patrick Mahaffy:]

It depends on whether it's ASCO or whether it's ESMO. But I will say it will be a high enough double-digit population with mature enough data, meaning at least been through a scan or 2, that will have a data set that will be interpretable. That's what's important to us, is that we not show a handful of patients and - which we wouldn't - we have much more than a handful now. But we wanted to be large enough and with enough time on drugs that is interpretable by the community.

[Tazeen Ahmad:]

Okay. Thanks very much, Pat.

[Patrick Mahaffy:]

You bet.

[Operator:]

Our next question is from Michael Schmidt with Leerink. Your line is now open.

[Michael Schmidt:]

Hey, guys. Thanks for taking my questions. Just a quick follow-up on the TRITON2 study. Just wondering when you would estimate this trial to complete. I'm just asking because it sounds like J&J had fairly rapid enrollment in their study, and it sounds like there's a lot of demand to get on to these prostate cancer studies.

[Patrick Mahaffy:]

So you didn't exactly ask this question. So I'll answer your question quickly, and then I'm going to talk about where we are competitively and where we understand ourselves to be competitively. We are doing everything we can to be in a position to file a supplemental NDA for TRITON2, pending data in '19. So obviously, that depends on pace of enrollment and a number of factors that aren't entirely in our control, but that is the time line we're operating for. You may be referencing a recent comment that got picked up by some analysts apparently made on the J&J call, that they are intending to file for approval in prostate cancer for Zejula in 2018. We have confirmed now that the gentleman who was speaking accidentally misspoke and was actually talking about ZYTIGA. ZYTIGA, Zejula, tomato, tomato. But everything we know suggests that since their trial is on hold today and they have no other single-agent trial underway that we're aware of, that we could never make the math work until we had confirmed by the IR department that, in fact, that mistake was made. So I believe that we are in a good potentially leading position in the space. And I will say that the interest in enrolling in this, as evidenced by the number of patients enrolled, obviously, we have screen failures because, as I told you, about 25% are mutant BRCA, is very high. So we're really happy about the physician enthusiasm for this.

[Michael Schmidt:]

Thanks for clarifying that. And then just a couple of questions on ovarian cancer. What is the duration of therapy, the median duration of therapy you're seeing now in clinical prac [ph] to the trial experience?

[Patrick Mahaffy:]

Yes. It's an important question we get asked here frequently. But it's a little early in our launch to give much clarity on the duration. For instance, it's increasing, and it's increasing because we have put more and more patients on drug, and it's starting to have an impact. So I think it'll be more like early and mid-next year before we're able to give something that feels it's informed by a data set, but nothing that is surprising us.

[Michael Schmidt:]

Okay. And then just going back to the debate or the second-line maintenance versus third-line treatment setting. If you look at your market research, what would you estimate, what percentage of patients that come off platinum-based therapy and second-line choose now maintenance as opposed to waiting for progression and do those tend to be more of the BRCA wild-type patients? Or is there - or is it that there are some mutant patients that are still holding out for progression at this point?

[Patrick Mahaffy:]

Yes. So we do market research related to this several times a year. In January, the market research - January of this year, the market research we did suggested that about 50% of physicians - so we do it with physicians, not patients, but let's say that's a proxy for patient use. 50% would prefer to use a drug - a PARP inhibitor in the maintenance setting, and 50% would prefer to use it in the treatment setting. In market research that we conducted in the last month or 2, that number had gone to 80%, so they were going to use it in the maintenance setting. So I would say the shift is pretty significant. And I can give you some reasons for it. One, the data from these trials, at least in terms of efficacy, is pretty encouraging. And so there's a call to action, as evidenced by, in our case, ARIEL3, that it's pretty powerful. Two, you all - and we speak to opinion leaders and do some surveys, and we get a lot of people who act as if they're going to limit its use to BRCA patients or HRD. But in the community setting, which is 75% or 80% of our use, and including, I believe, as well many academic institutions, the opportunity to treat women where you see real potential benefit and don't require a diagnostic is a huge incentive to consider the maintenance indication as opposed to treatment, which, in our case, requires a diagnostic, waiting for results from that diagnostic and potentially having to tell the patients. I'm sorry, you're not one of the 4, the 25% that could benefit, and therefore, I can't give you this drug. So it's a dramatic change. It's happening in real time. We're looking forward to participate in it as soon as we get the approval on our strong ARIEL3 data set.

[Michael Schmidt:]

Great. And one if I may, and this is on the topic of the free drug given away to - as part of your program. You said it's about 20% of demand. But then when - but then you mentioned, I think you said about 21% of patients are Medicare at this point. So I'm just trying to reconcile the - is it that Medicare patients [Technical Difficulty]?

[Patrick Mahaffy:]

So the percentage of our patients that is Medicare is, I think...

[Daniel Muehl:]

29%.

[Patrick Mahaffy:]

29%, not 21%.

[Daniel Muehl:]

Yes.

[Patrick Mahaffy:]

But you are seeing, since Medicare dominates this, that approximately 2/3-ish of the Medicare patients are getting free drug through this payer assistance program.

[Michael Schmidt:]

Okay, great. Thanks for the clarifying that.

[Patrick Mahaffy:]

You bet.

[Operator:]

Our next question is from Kennen MacKay with RBC. Your line is now open. If you phone is on mute, please un-mute it.

[Kennen MacKay:]

Sorry about that. Pat, I was wondering if you could tell us if you've done any sort of market research, which would suggest potential, once you have a maintenance label, for switching use of a drug that a patient is currently receiving or potentially either for efficacy reasons or if a patient is hitting an adverse event that would be leading to a dose reduction or potentially discontinuation despite sort of continued maintenance treatment and not having disease progression, whether there's any potential to sort of switch drugs there.

[Patrick Mahaffy:]

We haven't done formal market research on that. Kennen, you're probably aware of this, that in the U.S. oncology market, as many as 1/3 to 50% of patients ultimately go off a drug because of tolerability issues, some just constitutional, some more serious side effects, and this is particularly true in later line patients. So we are aware of tolerability problems associated with other drugs that have been approved, and I would anticipate that we would see some patients who would convert over to a newly approved drug with the same indication. I can't give you a percentage, I don't know what that would be, but I'm absolutely confident that it will occur.

[Kennen MacKay:]

Got you. Okay. And then, I guess, from your current marketing of Rubraca in the treatment setting in third-line treatment in just BRCA-positive patients, I guess, do you have any sense of whether any of these patients have previously seen a PARP inhibitor, either in the maintenance or the treatment setting? And what potentially responses have worked right there, even if it's sort of just anecdotal from your marketing experience so far?

[Patrick Mahaffy:]

Yes. It's a fundamentally important question, and I don't have an answer for you. I'll kind of come back to your earlier question. We knew from our launch that we did have patients who had - because olaparib had been on the market for 2 years at the time we launched, and at that time, it does not any longer. But at that time, it also kind of suffered from a 16-capsule pill burden that we did have patients come off of that or having failed that, at some point, were then given rucaparib. I don't have a data set to share with you that said, and this is what we saw. I'm aware of some failures, I'm aware of some responses, but I don't know what the total story is because it's a series of anecdotes that I've got. It is an important question for the community and especially not in the case of coming out for tolerability because you may still be able to benefit from a PARP inhibitor, but an important issue for this whole community, we as developers, the clinical community treating patients, is learning how to sequence PARP inhibitors, and that's going to be a subject of real attention over the next couple of years.

[Kennen MacKay:]

Yes. I agree. And I would think that would make for a very interesting case study publication for some academic. And then maybe just 1 follow-up. I guess, thinking about the combination of Rubraca plus Opdivo in front-line ovarian. Can you tell us a little bit about some of the data that you've accumulated to date, whether clinical or preclinical of that combination, that sort of gives you confidence for that regimen in front-line?

[Patrick Mahaffy:]

It's a great question. We have shown really compelling preclinical data, but this is based on a very strong preclinical data set and biological rationale. And just to remind you, in this mouse model, the mice were not so well treated with the PD-1, were well treated with rucaparib, were effectively cured with the combination of rucaparib and PD-1. So - but that's mice and we know that. I will say that we have a safety net in this trial. While we're confident, and I can tell you that the investigator enthusiasm to be a part of this trial was exceptionally high, and we're confident it will enroll fast because patients are aware of PARP inhibitors and they're aware of the importance of immunotherapy, and so to combine that in 1 trial is going to be compelling, I think, to many women. We also have rucaparib as monotherapy in that trial. So we have the opportunity in the event our expectations aren't met to look just at rucaparib.

[Kennen MacKay:]

Got you. Okay. Thank you so much for taking my questions.

[Patrick Mahaffy:]

You bet. Thank you.

[Operator:]

Our next question is from Peter Lawson with SunTrust. Your line is now open.

[Soumit Roy:]

Hi. This is Soumit Roy for Peter Lawson. Thanks for taking the question. The question is, when you do your market research, which kind of physicians you find the most hard to reach to for the maintenance setting, like those physicians who are already prescribing Zejula or LYNPARZA or even Avastin? Are those physicians who are averse to prescribing any maintenance setting or any maintenance drug? And what percentage of prescribers of that kind who want to give their patients a drug holiday and don't want them to get into another more before relapsing?

[Patrick Mahaffy:]

Well, we may not conduct quite as drilled down a market research as that would suggest. We look to a cross-section of community-based and academic practitioners. We have - we try to and work it out, it is reflective, we believe, of the community. I do not believe we have gone out specifically and said, for instance, for those who have not treated with maintenance, will you treat, or for those who don't believe in maintenance treatment, will you treat. So I unfortunately can't really answer your question. I can say that the data do suggest, from a broad section of KOLs and community-based practitioners, that 80% are planning to prescribe in the maintenance setting.

[Soumit Roy:]

Okay. Another comment we keep hearing from some of the KOLs on being the reversion mutation in BRCA, which is causing some resistance to PARP inhibitors, and some color we got, that it could be a bigger problem in coming few years, and they're thinking of combining it with DNA damage and repair PARP inhibitors. Or, I mean, are you seeing any kind of resistance developing? Or is it a significant issue? And are you thinking of combining it with anything other than the I-O agents?

[Patrick Mahaffy:]

Well, we're the ones that pioneered this work and collaborated with some academics. So we are the ones who presented data on reversion mutations, and we're highly focused on it. And it's why, back to Kennen's question about kind of PARP after PARP, there's a real question about whether this is going to be a class effect, again, particularly in the BRCA and mutant patients, that would render not only subsequent PARP inhibitors but potentially because it's a cause of resistance to platinum, subsequent platinum therapy to be more or less affective. So there is a lot to learn here. We are committed to continuing to participate in a translational way to understand this and, to your point, to determine both preclinically and, ultimately, clinically is beyond I-O agents, if there are other combinations that may overcome that resistance ideally in combination with rucaparib or perhaps in subsequent therapy to rucaparib.

[Soumit Roy:]

Could you give us any number, like what percent you think the resistance you could see?

[Patrick Mahaffy:]

Well, everybody fails, right? I mean, that's the tragedy of this. What our data show, what is in numbers of patients like - where we were able to get biopsies post failures, so it's not a large number. But the data suggest that the primary cause of resistance is reversion mutations. So to the extent that, ultimately, a BRCA patient fails after good success on a PARP inhibitor, the odds are high that she failed because of reversion mutations.

[Soumit Roy:]

Okay. Thank you so much for the answers.

[Patrick Mahaffy:]

Sure.

[Operator:]

Our next question is from Paul Choi with Barclays. Your line is now open.

[Paul Choi:]

Hi. Good afternoon, and thanks for taking our questions. My first question is with regard to the patient assistance programs. Some of the companies in the prostate cancer space have commented that copay foundations have sort of run out of funding, which has caused an unusual uptick in use of patient assistance programs. Can you comment if this is the case that you're seeing in ovarian cancer as well? And is it your sense that this is affecting Clovis disproportionately? Or is it affecting other companies in the space as well?

[Patrick Mahaffy:]

Yes. Dan mentioned this specifically in his section, that, in fact, it relates very specifically to the fact that the funds that have, in the past, been available from foundations are no longer available. Obviously, I cannot speak for either of our competitors in the PARP space. I'll let them speak for themselves, but they do have similar programs and my understanding from the FPs is that it's just broadly applicable, in fact, in oral oncolytics, generally.

[Paul Choi:]

Okay. So should we understand your comments to be that these foundations probably won't have comparable or to historical levels of funding for 2018, at least, that's your near-term expectation?

[Patrick Mahaffy:]

Yes. I think we want to make clear that we expect this trend to continue into the foreseeable future. We don't see a change happening in foundation funding, certainly not that is visible to us.

[Paul Choi:]

Okay. Great. Then my next question is on Europe. Can you maybe give us any updates on your preliminary discussions with payers there about what reimbursement rates might look like relative to the 1 approved inhibitor on the market there with LYNPARZA, which did have some initial resistance with some payers, and how those discussions are going?

[Patrick Mahaffy:]

It's early days, and, of course, we're not even approved yet. We have already been rejected by NICE in the U.K., joining a long list of oncology companies that have been rejected by NICE. We'll go back. So I'm just saying that this isn't surprising. But we haven't had as active a dialogue with any other payer. Ultimately, I think that we're going to be as - we're going to be in a pretty narrow band with other PARP inhibitors.

[Paul Choi:]

Okay. And then just finally, I think in the past, you had mentioned you were thinking approximately 100 people, give or take, in total for the size of your European sales force. Is that still sort of the bogey that you're thinking about as the approvals and reimbursements come online?

[Patrick Mahaffy:]

Yes. It was a very important point of timing. Yes, broadly speaking, I think that's about right. But as I noted, we don't anticipate bringing them on at a time of a potential approval but market by market as we get either very close to or have achieved reimbursement.

[Paul Choi:]

Great. Thanks for the update and for taking our questions.

[Patrick Mahaffy:]

Paul, thank you.

[Operator:]

Our next question is from Jing He with Gabelli. Your line is now open.

[Jing He:]

Great. Thank you for taking the questions. So, first, after you recently granted priority review for olaparib being BRCAmut HER2-negative for breast. So it seems to me that Rubraca and Zejula cannot get that type of label due to limited data in placebo. So, first, I'm just wondering, if they get the label, how would you think about the impact on ovarian cancer market? And second, could this also be a problem for you in your future files?

[Patrick Mahaffy:]

I'm sorry. I didn't understand the first part of that question. So - I want to make sure I heard - because you asked a question about Zejula, I think. What - do you mind asking that again?

[Jing He:]

Sure. Yes. So for the BRCAmut HER2-negative population, I think it sounded like maybe that you got that type of label. So I'm just wondering what will be the impact for the rank [ph] as market, because, to some extent, LYNPARZA has the potential to become the widely most prescribed PARP inhibitor by then.

[Patrick Mahaffy:]

I think you're talking about - these are the data from [indiscernible] and triple-negative breast, correct?

[Jing He:]

I'm talking about that way [indiscernible] priority review on HER2-negative and BRCAmut breast cancer patients.

[Patrick Mahaffy:]

That's right. Yes. That's right. And I would anticipate they would get the approval, but that's in later-line patients. The trial under development and plan with Opdivo is in earlier-line patients in combination with Opdivo. So, first, it doesn't impact on our trial design. We're actually trying to get into an earlier line of patients, so we would not be impacted by that approval. And secondly, it is conceivable that with that approval, they would get - it will not have an impact on the ovarian market, but it will have an impact on their sales, because they will get sales in the breast cancer market, and they may end up generating higher revenues than we - while they enjoy labels in 2 indications. Perhaps when we get a prostate label a couple of years later, we would then go quite a bit higher, too. The important thing, I think, to note is you're seeing a lot of development activity in this class as monotherapy and in combination, in particular, with I-O agents, and we're going probably in somewhat different directions. All of us have the opportunity to enjoy meaningful revenues based on successful trial activity. And I think our clinical trial plan is exceptionally well thought out. I think that we're moving as rapidly as we can, either alone in certain cases or in combination and collaboration with Bristol-Myers. And I'll give an example, as we spoke about on this but didn't really highlight. We're planning to start a second-line bladder study with monotherapy rucaparib in the spring of 2018. That is a registration directed trial for an accelerated approval in bladder cancer, if that is - if the data are sufficient to support it. So we all have robust development programs. We're all going to have, over time, broader labels. The advantage, over time, will come from who has the best labels. And frankly, when those labels converge, the important differences that are merging in terms - perhaps less so in efficacy but certainly in tolerability.

[Jing He:]

That's very helpful. And also, I just wanted to double check on the Opdivo combo time line. I think previously, you have said that you're initiating the Phase III by the end of '17 and the Phase II in early '18. I think that (inaudible) in this quarter. So I'm just wondering, is there any difficulty in enrolling certain patient population?

[Patrick Mahaffy:]

It has nothing to do with enrolling. To be clear, we've said that all 3 would start by the end of this year. The prostate one is on track to do so. The triple-negative breast and ovarian took a little more time to develop the protocols with our collaborators, I don't mean just BMS but the KOLs, than we anticipated, and so it slipped into early '18. But they'll start shortly.

[Jing He:]

Okay. Sounds good. And lastly, I'm just wondering, what percentage of patients in Q3 that you see are from off-label use?

[Patrick Mahaffy:]

It's - not ovarian, it's consistently around 10% of our sales.

[Operator:]

Our next question is from Steven Breazzano with Evercore ISI.

[Steven Breazzano:]

Could you maybe comment if there are any responses seen in the Phase Ib combination study with TECENTRIQ and when we might see the data? And second, in the first-line ATHENA study, if successful, would this be able to enable those a Rubraca monotheraphy approval as well as a Rubraca plus Opdivo approval in the maintenance setting?

[Patrick Mahaffy:]

The answer to your second question is yes, although one is materially better and we would anticipate it would be the combination of Opdivo that's going to be a driver. But the answer is yes. And then as to your first question, we're not the sponsor of that study, and so I feel that it's - I know that it's inappropriate for us to comment on data from that trial until it's released by Roche-Genentech. So we are highly focused on it. Obviously, the first part went well, and we achieved a good dose, so that should be a sign of confidence in the combination and the fact that we're expanding into these expansion cohorts rapidly. I do hope, but I can't commit, that some data from this trial may be presented at a scientific meeting next year, but again, that would be Genentech's decision, not ours.

[Operator:]

Our next question is from Cory Kasimov with JPMorgan.

[Unidentified Analyst:]

This is Shawn for Cory. So maybe changing gears just a little bit here. Two-part question regarding the planned adverse trial in urothelial carcinoma. So can you maybe remind us of the rationale or perhaps the preclinical or even clinical data that informs your decision to go into this indication? And then the second part, we've seen a couple of pivotal Phase II single-arm trials in this space, so maybe if you could comment on whether or not you're thinking about this trial as potentially being registrational.

[Patrick Mahaffy:]

We are thinking of it as being potentially registrational. And the rationale is twofold. One, the primary - well, I-O is being used more and more frequently in bladder, but historically, the primary treatment of bladder cancer has been with platinum-based regimen. And as you're aware, there's a great amount of - platinum responsiveness is, in itself, a pretty good biomarker of activity for a PARP inhibitor, witnessed each of the 3 now reported studies in maintenance in ovarian cancer. And two, we know from the work we've done in evaluating public data sets, the TCGA data sets, that 2/3 of patients with advanced bladder cancer or LOH-higher HRD, so that can include BRCA life patients but also BRCA and other HRD-gene mutations in these patients, so we're fundamentally optimistic about the potential here.

[Operator:]

And I'm showing no further questions. I would now like to turn the call back to Breanna Burkart for any further remarks.

[Breanna Burkart:]

We thank each of you for your interest in Clovis Oncology today. If you have any follow-up questions, please call me at [phone], or Anna, who graciously shared her birthday with us today, at [phone]. This call can be accessed via replay of our webcast at clovisoncology.com, beginning in about 1 hour and will be up for 30 days. Thank you for your interest and time. Have a great evening.

[Operator:]

Ladies and gentlemen, thank you for participating in today's conference. You may all disconnect. Everyone, have a great day.