What happened

Shares of Clovis Oncology (NASDAQ:CLVS) fell over 21% today after AstraZeneca (NASDAQ:AZN) and Merck (NYSE:MRK) reported promising data for olaparib as a treatment for BRCA-mutated ovarian cancer in patients who completed chemotherapy. The excitement is over a measure called progression-free survival (PFS), or how long a patient goes without seeing cancer worsen or reappear.

In a study named SOLO-1, the median PFS for patients receiving placebo was 13.8 months. The group taking olaparib had yet to reach a median PFS -- and that was at 41 months. The number of women that achieved PFS of 36 months more than doubled for those receiving olaparib as compared with placebo. That's a remarkable observation. 

So, um, how does that affect Clovis Oncology? The company's shares slid to a 19.3% loss as of 12:36 p.m. EDT on Monday.

A scientist in the lab with a disappointed look on his face.

Image source: Getty Images.

So what

AstraZeneca and Merck's olaparib belongs to a class of drugs called poly ADP ribose polymerase (PARP) inhibitors. There are three such drugs on the market today -- olaparib (Lynparza), rucaparib (Rubraca) from Clovis Oncology, and niraparib (Zejula) from Tesaro -- approved to treat a rare form of BRCA-mutated ovarian cancer or as late-stage treatment for BRCA-mutated ovarian cancer.

But there's a race now underway in the clinic to demonstrate the ability of PARP inhibitors to serve as first-line treatments for BRCA-mutated cancers including ovarian cancer, breast cancer, and prostate cancer. There are billions of dollars in annual sales on the line, and how the markets get sliced up may end up coming down to which company earns marketing approval first.

For instance, Clovis Oncology's rucaparib is the most advanced PARP inhibitor being studied as a treatment for prostate cancer, but it's behind competitors in ovarian cancer. Analysts are now considering that the excellent data for olaparib released over the weekend may have just pushed the goalpost even further downfield for Clovis Oncology in ovarian cancer. It follows somewhat disappointing news for rucaparib in one subset of prostate cancer patients announced last week, although the data impressed elsewhere

Now what

Clovis Oncology stock has lost over 70% of its value in the last 12 months. While some may view that as an opportunity given the potential for the Rubraca franchise in prostate cancer, waning excitement for the company's pipeline isn't the only thing that resulted in the market cap tumbling to $1.1 billion. The business is on pace to deliver an operating loss of $300 million in 2018, which makes the risk of underperforming lofty expectations in the PARP inhibitor race even more serious for investors.

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