Clovis Oncology, Inc.
Q4 2017 Earnings Call Transcript

Published: 27 Feb 2018

[Operator:]

Good day, ladies and gentlemen and welcome to the Fourth Quarter 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 introduce your host for today's conference Anna Sussman, Vice President of Investor Relations and Corporate Communications. Please go ahead.

[Anna Sussman:]

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

[Patrick Mahaffy:]

Thanks, Anna. Welcome, everybody. Thank you for joining us this afternoon. I want to apologize; I'm losing my voice, so apologies in advance if you can't hear me all that well through the call. Let's begin with a review of our one share for Rubraca. I'll remind you there are initial Rubraca approval that was granted December 19, 2016 for a fairly narrow mutation specific ovarian cancer treatment indication and our commercial team has been out in the field selling Rubraca for just over a year ago. We achieved $17 million in net sales during the fourth quarter and $55.5 million for the full year. As noted in the news release, this does not include the $4.7 million in the fourth quarter and $14.1 million for the full year in commercial value provided to eligible patients of free drug supply through our patients assistance program. As it did in the fourth quarter, this continues to represent approximately 20% of overall commercial supply. Since the last nearly 1,400 patients have initiated therapy and over 900 healthcare providers have prescribed Rubraca. Sales increased very slightly in the fourth quarter over the third quarter and we've had four consecutive quarters of growth, despite approvals for two other PARP inhibitors were substantially broader levels. In fact, we are participating in a rapidly evolving ovarian cancer market which I'll describe now briefly. At the time of our launch, Rubraca became the second PARP inhibitor approved in the U.S. for later line treatment for patients with mutations of BRCA. In the second and third quarters of 2017, the first PARP inhibitors indicated for the second line maintenance treatment setting was approved in all-comers with no requirement for diagnostic testing. As a result of data in this setting including our own aerial pre-dataset, maintenance treatment is rapidly becoming the standard of care for advanced ovarian cancer patients which limits the available patient population for third line treatment with the PARP inhibitor. In addition, it has become rapidly apparent that given the choice of treating all converse or ordering a tissue-based diagnostic test to identify the 25% of patients sort of mutant BRCA physicians clearly are taking advantage of this new opportunity to avoid the cost and delays and at times, frustrations associated with diagnostic testing. Based on results from the ARIEL3 study, we believe Rubraca will be highly competitive in addressing that all-comers maintenance population once approved by the FEA. We're very enthusiastic about these data and I'll provide more detail on the supplemental NDA currently under review by the FDA in just a few moments. So for now and potentially upto our PDUFA date of April 6, which continues to be limited to a relatively small population of addressable mutant BRCA patients. We believe our strong performance today in this population reflected general confidence prescribers are gaining with Rubraca as their experience and familiarity with the clinical profile increases. Many of the clinicians that are using Rubraca today of course are the same physicians who have prescribed it upon potential approval of a broader maintenance label. Overall, we're pleased with the first full year of the Rubraca launch despite the headwinds resulting from the adoption of the second-line maintenance indication in the U.S. ovarian cancer community. Of course, these headwinds should become tailwinds upon our anticipated approval in the maintenance setting. As mentioned on the third quarter call and as we've achieved in our fourth quarter results, we continue to expect sales to be stable to modestly up until receipt of an approval for the maintenance indication for Rubraca. Importantly, the feedback we are receiving from clinicians about their experience with Rubraca suggest that the clinical profile of Rubraca is well regarded and provides clear benefit to the patients. As a result, and based on the data from ARIEL3, we believe Rubraca will compete well upon potential approval for second-line maintenance indications, hopefully very soon. I'll turn now to discussing our regulatory progress to-date for both, U.S. and Europe. Starting with U.S., as noted earlier, our PDUFA date for our supplemental NDA to the FDA is April 6, 2018. The submission is based on the robust ARIEL3 data for the maintenance treatment of patients with recurrent epithelial ovarian fallopian tube or primary perennial cancer who are in complete or partial response to platinum based chemotherapy. The ARIEL3 data were our highlight for 2017 beginning with the topline in June followed by the presentation of the comprehensive ARIEL3 dataset at ESMO in September and a subsequent publication in The Lancet. We've been gratified by the enthusiasm and excitement with which these results have been embraced and this enthusiasm drives our effort to seek approval to include these data in our U.S. label and to seek it's approval in Europe as well, so that all-comers population with recurrent ovarian cancer patients can have access to this very important drug. We look forward to providing an update on our U.S. regulatory process sometime between now and April 6. Turning now to our regulatory progress in Europe. Our European submission for Rubraca for the mutant BRCA ovarian cancer third-line treatment setting was accepted during the fourth quarter of 2016, and remains under review by the EMA. As we announced last week, the CHMP communicated to us a positive trend vote for Rubraca at their February meeting following a scientific advisory group meeting and an oral explanation that was held earlier last week. We also communicated their intent to hold the CHMP opinion vote on the treatment indication at the March meeting. We anticipate that the indication statement will be focused on a subset of platinum-sensitive disease where there is particularly high unmet medical need. Pending a positive opinion by CHMP in March, final approval by the European Commission would follow in the second quarter of 2018. Upon receipt of this potential approval for the treatment indication, we intend to submit what's called a variation to the marketing authorization for Rubraca to include the second-line or later maintenance treatment indication directed at the broader all-comers population based on ARIEL3. We anticipate a potential CHMP vote for the maintenance indication by year end 2018 and assuming a positive vote, a formal approval on or late 2019. It's important to note here for those less familiar with the European regulatory processes that upon receipt of the first approval, the second submission is required to be reviewed on a six months review clock. Beyond the benefits of the treatment indication itself, we are pleased that a potential approval in treatment would also lead to a more rapid review for the broader all-comers maintenance indication. Given this timing, we are actively building out our European commercial and medical affairs leadership teams; obviously the majority of planned European hires, including the sales forces will coincide with reimbursement approval in the individual countries. We also now of course, have our regulatory clinical safety, quality and supply chain teams in place at our Cambridge, UK office. Now let me turn to an update on clinical development including our broad clinical collaboration with Bristol-Myers Squibb for multiple combination studies of Opdivo and Rubraca. In late July, and Bristol-Myers Squibb or BMS, announced a broad clinical collaboration agreement to evaluate the combination of their first-in-class immunotherapy Opdivo or nivolumab and our PARP inhibitor Rubraca in pivotal Phase 3 clinical trials in advanced ovarian cancer and advanced triple negative breast cancer, as well as the Phase 2 clinical trial in metastatic castration-resistant prostate cancer. We are working closely with BMS to get all these studies up and running, our metastatic CRPC study initiated in late 2017 and the pivotal studies in advanced ovarian and advanced triple negative breast cancer are both expected to begin during the first half of 2018. These studies will be conducted in the United States, Europe and additional countries. The advanced ovarian cancer study will focus on first-line maintenance treatment and is known as ATHENA which will be sponsored, funded and conducted by Clovis. The stage 3 study evaluate Rubraca plus Opdivo; Rubraca, Opdivo and placebo in newly-diagnosed patients with stage 3/4 high-grade ovarian, fallopian tube, or primary peritoneal cancers who have completed platinum-based chemotherapy. This study, in approximately 1,000 patients includes all-comers population with a similar step-down statistical plan to ARIEL3. Phase 3 pivotal study in advanced triple-negative breast cancer will be sponsored and conducted by Bristol-Myers Squibb with all costs shared equally between BMS and Clovis. BMS is expected to describe the trial design at a later date, likely closer to study initiation. The Phase 2 prostate cancer study initiated late 2017 and is sponsored, funded and conducted by BMS. The study will evaluate the safety and efficacy of Opdivo in combination with Rubraca in patients with metastatic, castration-resistant prostate cancer and is being conducted as an arm of a larger BMS sponsored study in a total of 300 patients. We're extremely enthusiastic about our clinical collaboration with BMS. It provides us the opportunity to partner with a leader in immuno-oncology, and equally important, a company with a shared strategic vision of how Rubraca and Opdivo should be developed in multiple indications, in a timely manner to hopefully create the greatest benefit for patients. Turning now to the rest of the Rubraca development program; I'll start with our company-sponsored studies including ARIEL4, our confirmatory study in the ovarian cancer treatment setting which is presently open for enrollment. It is a Phase 3 multi-center randomized confirmatory study of Rubraca versus chemotherapy in relapsed ovarian cancer patients with BRCA mutant ovarian cancer, those tumors have progressed after two or more prior lines of therapy, primary endpoint of this study is progression-free survival. We also had two Clovis sponsored prostate cancer trials that are actively enrolling patients. The first Clovis sponsored prostate trial is TRITON2, our Phase 2 single arm study, inclusive of patients who have a germline or somatic BRCA, or ATM mutation or other deleterious mutations in HR repair genes who tumors have progressed after receiving one line of taxane-based chemotherapy and one or two lines of androgen-receptor targeted therapy in the castrate-resistant setting. The planned primary endpoints are radiological, overall response rate in patients with measurable disease and PSA response in patients without measurable disease. If successful, this trial is designed to support a supplemental NDA submission or an accelerated approval. As TRITON2 as an open-label study, we are planning to present initial data from the study at a medical meeting in the fall, hopefully ESMO. Our intent would be to include data on 40 to 60 patients with sufficient median timeline drug to provide a true initial view of activity in this genetically defined advanced prostate cancer population. Our second Clovis sponsored prostate study is TRITON3, a randomized comparative Phase 3 study that includes patients with other tumor germline or somatic BRCA or ATM mutation who have progressed on AR targeted therapy but not yet received chemotherapy in the castration-resistant setting. The study will compare Rubraca to position it's choice of AR targeted therapy or chemotherapy. Plain primary endpoint is radiologic progression-free survival and this study could potentially sort of as a confirmatory study should the TRITON2 study warrant an accelerated path. One of our newer studies called ATLAS is a single-arm Phase 2 open-label study of Rubraca as monotherapy in recurrent, metastatic bladder cancer. This is an all-comers population with most selection based on HRD status and the study is now open for enrollment. Eligible patients are those who have failed one or two prior therapies. And finally, turning to additional collaborator sponsored trials; our Phase 1b study in collaboration with Genentech to evaluate a novel combination therapy of their cancer immunotherapy Tecentriq or atezolizumab and Rubraca continues to enroll patients. Phase 1 portion of this study sponsored by Genentech-Roche is now complete and the recommended Phase 2 dose is full dose atezo and full dose Rubraca. The trial is now enrolling patient cohorts in triple-negative breast and ovarian cancers. Our newest Clovis sponsored study is called RUCA-J, our Phase 1 Japanese study in which the first patient was dealt with Rubraca last week. The study with safety in PK is primary endpoint, seeks to identify the recommended dose of rucaparib in Japanese patients which will enable development of a bridging strategy and potential inclusion of Japanese sites in planned or ongoing global studies. Now, I'll turn the call over to Dan to discuss fourth quarter and full year financial results.

[Daniel Muehl:]

Thanks, Patrick, and good morning, everyone. Our fourth quarter and year end 2017 financial results are included in this afternoon's press release. I'll review the highlights of our financial results and provide some additional commentary. Net product revenue is $17 million for the fourth quarter of 2017 and $55.5 million for the year ended December 31, 2017. The supply of free drug represented an additional $4.7 million in commercial value during the quarter, and an additional $14.1 million in commercial value for the full year. The supply continues to represent approximately 20% of the overall commercial supply. The majority of these patients are Medicare patients. Since foundation support for uninsured and underinsured was not available in 2017 to the extent that has been in previous years, a larger number of patients sought assistance through other means, including companies' patient assistance programs. We expect these supply of free drug to remain in this range for the foreseeable future. Turning now to our balance sheet; we ended 2017 with $563.7 million in cash, cash equivalents and available-for-sale securities. In January 2017, we raised net proceeds of $221.2 million through an offering of 5.75 million shares of common stock and in June 2017, we raised net proceeds of $324.6 million through an offering of 3.92 million shares of common stock. Cash used in operating activities was $65.6 million for the fourth quarter of 2017 and $260.9 million for the year compared to $54.7 million for the fourth quarter of 2016 and $266.7 million for the year ended 2016. Cash used in operations includes drug/product supply cost of $12 million in the fourth quarter of 2017 and $53.5 million for the full year 2017 compared to zero and $19.2 million for the comparable periods in 2016. These drug supply cost will increase in 2018 as sales grow, clinical trials expand and we build inventory and safety stock related to our transition to a new manufacturing facility anticipated to open in early 2019. We believe this new facility will not only support anticipated future drug supply needs for Rubraca but will do so at a substantially lower cost than our current drug supply. We reported a net loss of $51.9 million or $1.04 per share for the fourth quarter of 2017 and $346.4 million or $7.36 per share for the full year of 2017. This compares to $70.7 million or $1.83 per share and $349.1 million or $9.07 per share for the comparable periods in 2016. Net loss for the fourth quarter of 2017 included share-based compensation expense of $12.5 million and $44.7 million for the full year 2017, compared to $10.1 million and $39.8 million for the comparable periods of 2016. The net loss for the year ended December 31, 2017, included a charge of $105.5 million related to the portion of a legal settlement paid in Clovis common stock, the net loss for the year ended December 31, 2016, included a charge of $104.5 million for an impairment of an intangible asset, a gain of $25.5 million for a reduction in fair value of contingent purchase consideration, and a $29.2 million non-cash tax benefit. The adjusted net loss, excluding these items was $63.4 million or $1.27 per share for the fourth quarter and $240.9 million and $5.12 per share for the full year 2017, compared to $70.7 million or $1.83 per share for the fourth quarter of 2016 and $299.2 million or $7.78 per share for the full year 2016. Our fourth quarter 2017 R&D expenses totaled $38 million and $142.5 million for the full year 2017; this compares to $54.5 million and $251.1 million for the comparable periods in 2016. The decrease year-over-year is primarily due to lower spending on Rubraca and rociletinib development activities 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 $38.5 million for the fourth quarter and $138.9 million for the full year 2017; this compares to $12.2 million and $40.7 million for the comparable periods in 2016. The increase year-over-year is primarily due to classifying as selling, general and administrative expenses related to the commercialization of Rubraca that had been classified as research and development prior to FDA approval. Now I'll provide some color on Rubraca from a finance perspective. We distribute our product principally through a limited number of specialty distributor and specialty pharmacy providers. These customers subsequently resell our products to patients and healthcare providers. Separately, we have arrangements with certain payers and other third-parties that provide for government mandated and privately negotiated rebates, charge-backs and discounts. As noted previously, net product revenue was $17 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 8% of gross revenue for the fourth quarter and the full year 2017. Gross to net adjustments are expected to remain in the high single-digits as a percentage of gross revenue in 2018, assuming that the distribution and payer mix remain consistent. In 2017, we only recognized revenue on product sales once the product was shipped to the patient or healthcare provider by the specialty distributor or specialty pharmacy provider. With the new rev recognition standard, ASC606, effective January 1, 2018, we will recognize revenue on shipment to the specialty distributors and specialty pharmacies. There will be a positive adjustment of $2.3 million to retain the earnings on January 1, 2018 to reflect the net impact of the remaining product value at specialty distributors and pharmacies at December 31, 2017 including applicable cost of sales, gross to net, and other adjustments. As a result of this change in accounting standard, you can regard the approximately $3.4 million in inventory at our specialty pharmacies and distributors at year end as revenue that will never get recognized. Our distribution mix for the year was approximately 72% specialty pharmacy and approximately 28% specialty distributer, and our payer mix was 63% commercial, 26% Medicare and 11% Medicaid and other. Cost of sales for the fourth quarter ended December 31, 2017, was $3.7 million and $11.7 million for the full year of 2017; this represents approximately 22% for the quarter and 21% for the full year net revenue. This consist of costs associated with the sale of Rubraca, mainly freight, royalties and amortization of capitalized acquired intangible license rights and milestone payments related to Rubraca. Based on our policy to expense costs associated with the manufacture of our products prior to regulatory approval, certain of these cost of Rubraca recognized as revenue during the year ended December 31, 2016, were expensed prior to the December 19, 2016, FDA approval and, therefore, are not included in the cost of sales during the current period. We expect cost of sales percentage to increase in 2018 in relation to product revenues with the depletion of these inventories as we have used the majority of the pre-commercialization inventory through the fourth quarter of 2017. With the FDA approval of Rubraca, all sales and marketing expenses associated with Rubraca are included in selling, general and administrative expenses and no longer in R&D. This had the impact of lowering R&D expenses and increasing our selling, general and administrative expenses on a comparable period basis from 2016 to 2017. We expect our selling, general and administrative expenses to increase in 2018 in support of a potential launch of the U.S. maintenance label approval and European commercial and administrative infrastructure in advance of potential product sales there. Clinical trial expenses shifted in composition in 2017, with the winding down of all rociletinib trials; ARIEL2, ARIEL3 and Study 10 for rucaparib. The ongoing TRITON2, TRITON3, ARIEL4, the new ATHEMA and ATLAS trials, as well as other company-sponsored trials, collaborations and investigator-initiated trials will increase our R&D spend in 2018. I'll turn the call back over to Pat.

[Patrick Mahaffy:]

Thanks, Dan. Alright, we are firm we're going to building this [ph] with several meaningful activities for Rubraca underway. We did well with our very limited treatment label in the United States and look forward to the opportunity our anticipated all-comers maintenance label will provide us to make the drug commercially available to a much larger population of ovarian cancer patients. We expect this opportunity to compete in the all-comers maintenance population will occur on or before our April 6 PDUFA date. We anticipate a CHMP opinion for Rubraca in the treatment setting in March, following last week's positive trend vote and a potential EU approval in the second quarter. We plan to follow this in the very near-term with the variation to the MAA filing for a broad maintenance treatment indication, and with a six months review clock could have a CHMP opinion on the maintenance setting before the end of 2018. Our robust prostate cancer development program is well underway enrolling patients, focused on specific mutations of BRCA, ATM and other HRD genes with the potential path to accelerated approval, and we look forward to a first look at the TRITON2 data, hopefully at ESMO in October. Our ATLAS study is open for enrollment and we look forward to demonstrating Rubraca's activity in that all-comers patient population. And our clinical collaboration with Bristol-Myers Squibb is underway, including 2 Phase 3 studies to commence during the first half of 2018, a one large Phase 2 study already enrolling patients evaluating Rubraca and Opdivo in combination in ovarian, triple-negative breast and advanced prostate cancers. With that, I'll be happy to answer any questions you may have.

[Operator:]

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

[Unidentified Analyst:]

Just in terms of the Bristol collaboration; can you talk about some of the gating factors between -- before you and Bristol start enrolling the Phase 3 combo studies in ovarian and breast? And then, also just as we start to learn more about using caco inhibitors and relevant biomarkers, can you talk about your strategy for the biomarker analysis in these trials? Thanks.

[Patrick Mahaffy:]

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

[Operator:]

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

[Peter Lawson:]

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

[Patrick Mahaffy:]

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

[Peter Lawson:]

How should we think about this full spilt [ph], both in the EU and the U.S. over the next 12 to 18 months?

[Patrick Mahaffy:]

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

[Peter Lawson:]

Finally, just on the TRITON2 data; do we get PFS data at ESMO?

[Patrick Mahaffy:]

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

[Operator:]

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

[Kennen MacKay:]

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

[Patrick Mahaffy:]

All companies now are using guidelines from FDA, we'll compete on the basis of the label data and to some extent from scientific publications. At a minimum, everything we know, even including the primary endpoint of the trial which is position assessed progression-free survival is that number is highest for Rubraca. I will hasten to tell you I'm well aware that number only includes non-BRCA for the 9.4 months that's in -- that is RO label but that is the number that's in the RO-label [ph], is 9.4 months and records at 8.4 I think for us. So we come in with a powerful statement about progression-free survival from the label and a higher number as you're aware from the publication. You're aware that we have demonstrated uniquely and improvements in response in many patients, particularly BRCA patients who are in the trial and we have a well-defined and characterized safety profile that seem as I believe amongst the easiest to manage of the safety profiles for each of these PARP inhibitors with one outlier being one that is somewhat more difficult than the other two. I'm really confident that while we are third, each of those two was approved less than a year ago, one less than six months ago. So that I think has time to create a market, the vast majority still of maintenance patients are still not being treated. So we are optimistic given the profile of our drug, given the feedback we get from patients or physicians who are ready to prescribe it having a good success in the treatment setting and given the characteristics of the dataset that we will compete exceptionally well once we are in the market with the label.

[Kennen MacKay:]

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

[Patrick Mahaffy:]

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

[Operator:]

Our next question comes from the line of Terence [ph] with Goldman Sachs. Your line is open.

[Unidentified Analyst:]

Can you give a little more color on the 2018 OpEx guidance [ph], especially as we approach the maintenance launch and as well as the EU launch?

[Daniel Muehl:]

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

[Operator:]

Your next question comes from the line of Michael Schmidt of Leerink. Your line is open.

[Michael Schmidt:]

Maybe first, regarding your view of the overall opportunity for PARP inhibitors in the second line maintenance setting, it's obviously the much bigger high I guess for Rubraca to get a piece off. I'm just wondering based on your market research at this point, what percentage of flat responders [ph] are actually on PARP inhibitor maintenance right now in the U.S. and you already expect this percentage to peak out?

[Patrick Mahaffy:]

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

[Michael Schmidt:]

In context of the TRITON2 study, you talked about potentially providing a response rate and duration information at this sort of first interim look, and just wondering in terms of the final data for the study; what is the clinical efficacy bar in terms of approval at the end data that's meaningful to price uptake in it's indication to prostate cancer?

[Patrick Mahaffy:]

Obviously it's going to be in the eyes of the FDA, and the FDA doesn't provide a sponsor; at least in my experience, doesn't provide a sponsor to their guideline at what number they need to see. They do take into account line of therapy and they do take into account duration and they do take into account a tolerability when they are looking at what response rate they want to see, they are looking really at more than response rate. What I will say is that in these later line patients who failed chemo, they don't really have any further options, sadly. And secondly, chemo itself has rendered a 2.5 or 3 months progression-free survival and a response rate that I think is in the 15% range for the docitaxel [ph], it might be slightly higher but it isn't that much higher than that. I'm not telling you 15% is good enough but I'm telling you I wouldn't think you need to have a number that like you've seen us deliver in earlier line or later line ovarian cancer, these patients I think are going to be somewhat later aligned even than our ovarian cancer population and therefore, I think that has to be taken into account when you consider an acceptable response rates.

[Michael Schmidt:]

You talked about several studies that are ongoing or about to start with Rubraca, in some case in combination with PD1 inhibitors. How do you view the opportunity to combine Rubraca with other agents, for example, MIC [ph] inhibitors, I think this is pretty interesting rational to look at that combination? And how do you think what exploring additional combination for Rubraca?

[Patrick Mahaffy:]

No, we believe in it. I can't comment specifically on a MIC inhibitor but we are opening a trial this year called Starfish; it is a many arm study, I'm not kidding, that's how we came up with the name Starfish. And our first combination will be with our own VGEF PDJF-FGF inhibitor rociletinib. So we clearly see an opportunity to combine with other agents and I imagine over the course of this year and next year, we will be announcing additional combination, I don't want to say anything now and then get ahead of our team but we will be announcing combinations beyond the combination with lucitinib [ph] over the course of this and next year.

[Operator:]

Our next question is from the line of Tazeen Ahmad of Bank of America. Your line is open. And our next question comes from the line of Paul Choi of Barclays. Your line is open.

[Paul Choi:]

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

[Patrick Mahaffy:]

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

[Paul Choi:]

It was with regards to learning's from the other maintenance launches and what you think Clovis can do with regard to potentially improving the patient mix so that you get an average longer duration of therapy.

[Patrick Mahaffy:]

Yes, that really comes with sometime. It's true of almost every oncology launch that often the first patients treated are those who may have been a little more advanced in their disease and no matter how good the drug, you're going to run into some experiences in this patient population that just can't be as good as they would be at somewhat earlier stage somewhat healthier patients. I do think it's -- on every sponsor to make sure that every effort is made to help physicians and patients understand the importance of adherence in preventing in the case of this indication [Technical Difficulty].

[Operator:]

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

[Jing He:]

So at JP Morgan, Pat, you talked about the size of the PARP market being around $1 billion to $2 billion. If we use Rubraca in positive pricing, could you help us to understand what are the major differences in your assumptions between the low end and the high end of the range?

[Patrick Mahaffy:]

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

[Jing He:]

And also, could you share your thoughts on the pricing, what kind of payer receipt [ph] that you've got so far as the cost of one PARP inhibitor is significantly lower than the other two?

[Patrick Mahaffy:]

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

[Jing He:]

Lastly, do you see any use in prostate cancer at this point?

[Patrick Mahaffy:]

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

[Operator:]

Your next question is from the line of Alex Schwartz of Stifel. Your line is open.

[Alex Schwartz:]

With your Phase 1 Japanese bridging study, how might Asian patients respond and metabolize Rubraca differently than U.S. patients; any expectations also on when you may be able to submit a package for approval to regulatory authorities? And then secondly, is there an update you can provide when we might see initial Phase 1 data of Rubraca plus Tecentriq safety data? I know you're not the sponsor but is there kind of any update you can provide there? Thank you.

[Patrick Mahaffy:]

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

[Operator:]

Our next question is from the line of Andrew [ph] of Morgan Stanley. Your line is open.

[Unidentified Analyst:]

As we think about potentially solo 1 [ph] reading out time and the implications, I guess commercially. I was wondering how you see that impacting the downstream opportunity for the PARPs; and then also, potentially the ATHENA trial?

[Patrick Mahaffy:]

I don't think it will affect the ATHENA trial, I think we're enrolling a much broader population than solo 1 [ph] enrolled; I'll come back to that in a moment. We do have the Rubraca-only arm if there is a desire to show what the combination looks like versus or well understood in characterized PARP inhibitor. So we have the ability to compare two of PARP inhibitor if solo 1 [ph] yields an approval in germline BRCA maintenance. Two; solo 1 [ph] and it's impact on the commercial environment, so there is no analogous study in '18, there is no opportunity for AstraZeneca and Merck to go beyond the solo1 population which is germline mutated BRCA patients and that represents about 15% of ovarian cancer patients. So the vast majority of eligible second-line maintenance patients from our other labels are so-could not be eligible for [indiscernible] as solo 1 [ph] reads out positively, so that's part one. Part two is, we of course anticipated very good outcome for solo 1, it's a good drug and the population, the BRCA mutated that do best on PARP inhibitors from evidence and the other maintenance study so I think it will be positive. If we have to show a pretty meaningful PFS versus what we expect would be a longer PFS in the control arm because foundations tend to have a longer progression-free survival in second or third-line patients and treaters -- and we've know this about ATHENA which is why we want so much for this PDP1 combo to be -- to represent meaningful impact. Physicians know that somewhere between 15% and 20% of patients coming off surgery, coming off their platinum doublet will not recur. So with all of us looking at frontline maintenance, we're going to have to generate meaningful data to overcome the evident fact that somewhere between 15% and 20% of the patients who are dosed would never have needed that drug. We're aware of that, I'm sure our co-PARP companies are as well. And the last thing I'll say is, we already see and we can talk about [indiscernible] but we already see that about 25% of our patients have had a prior PARP inhibitor. So the concept of PARP following PARP is rightly or wrongly something that is being actively pursued by treaters; this were required study by the way but these are complicated studies to some of the -- or complicated run but particularly here we happen to believe that if a women has a strong benefit in the maintenance setting following her frontline therapy, it goes out in subsequent platinum doublet and benefits on that platinum doublet. Our guess is that many physicians who will have continued to treat this patient will try maintenance again with the PARP inhibitor if anything to delay as long as possible as subsequent round of chemotherapy. So I just have to say, I don't think the market dynamics are going to be as substantial as one might fear.

[Unidentified Analyst:]

I mean I think that Tushar [ph] has presented some data saying that somewhere around 20% or part of the usage is in the frontline which I'd assigned strange given that there are no data yet to support that? And I guess also what do you think the implications could be from the French cooperative trial that's ongoing using a vast [indiscernible]?

[Patrick Mahaffy:]

Again, that trial is not a registration trial, so it's a publication and that it may just tell people what they already know which is one could consider combining a PARP inhibitor with Avastin. If -- I don't believe I know the design of that trial; one, is cooperative settings, two, it's not designed to be a registration study. So I don't think it's going to change what's registered and further, in the event that market research is showing that some of the years -- I think they even said in that same deck that 18% of the drill was in frontline maintenance if I remember that -- I mean, a little bit wrong but I think that's what they said. And all I will say is it positions our prescribing and payers are reimbursing frontline use. In maintenance, that won't be limited to one or two companies, it will be potentially -- if that is occurring, it's going to occur for each of these drugs as physicians gain confidence and choose case-by-case, physician-by-physician, the drug they like the best. So I don't think there is anything about that, A) that is supported by data other than just knowing that you can jump from all those things -- second-line maintenance to the possibility of frontline maintenance being even better. But I also think that that would be unique to one PARP inhibitor.

[Operator:]

Your next question is from the line of Corey [ph] of JP Morgan. Your line is open.

[Unidentified Analyst:]

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

[Patrick Mahaffy:]

We don't have liver-tox, we did not see a case of liver-tox. We have transient elevations of ALT and AST which tend to rise in 30% of patients in their first cycle and almost always normalize by the end of their second cycle. So we don't know the cause and we like to; this does occur to a lesser extent on [indiscernible] and to a lesser extent on [indiscernible] but again, there is no liver-tox, there is transient elevation of liver enzymes that had no downstream consequences. In the paper, there are right around 9% of patients who had grade 3/4 elevations and it is largely that percentage who would dose reduce. It's that population who at the higher reported grade but that's the highest we would have seen.

[Unidentified Analyst:]

And that's the only place it's really coming from, correct? In terms of dose reductions that small percentage of patients who have the elevated liver enzymes?

[Patrick Mahaffy:]

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

[Unidentified Analyst:]

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

[Patrick Mahaffy:]

We have an agreement with FDA. It's not a spot, so I would try to make sure you understand it but [indiscernible] has agreement with FDA about the trial and it's potential use and what would allow it to be potentially used for an accelerator [ph].

[Operator:]

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

[Steven Breazzano:]

Just given your experience now in the market; is it your sense that most of the prevalent population has been worked through and that most of the new patient starts will be those coming on to second and third-line plus?

[Patrick Mahaffy:]

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

[Operator:]

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

[Anna Sussman:]

Thanks, Amanda. Thanks, everyone. We appreciate your interest in Clovis. If you have any follow-up questions, you call reach me at [phone]. This call will be accessible via replay at our webcast beginning about an hour and it will be available for 30 days. Thanks for your interest and time. Thank you, and have a good evening.

[Operator:]

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