What happened
Shares of Clovis Oncology (CLVS) lost over 60% of their value last month, according to data provided by S&P Global Market Intelligence. While investors might expect a drop of that magnitude for a development-stage biopharma reporting that an important drug had failed in the clinic, that wasn't the case here. Rather, the stock's whopping October decline was spread across three separate news events that went against the company.
So what
The first two sources of sour news came from the European Society for Medical Oncology (ESMO) meeting, which is one of the largest and most important conferences in the healthcare industry. Investors eagerly awaited updates from a class of drugs called poly ADP ribose polymerase (PARP) inhibitors, which have shown tremendous potential to treat cancers with BRCA mutations, namely ovarian, prostate, and breast cancers.
There are three major PARP inhibitors already on the market, but they're each approved as maintenance therapies for late-stage disease, which are relatively small market opportunities. The trio is racing to complete new clinical trials investigating their potential to serve as treatments for early-stage cancers. The first to hit the market in each indication could capture the lion's share of the opportunity, so great data and time are of the essence.
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At the ESMO meeting, Clovis Oncology provided an update for its PARP inhibitor, Rubraca, in prostate cancer. While a 44% tumor response rate was observed for patients with a BRCA mutation (the internal target for seeking accelerated approval was just 25%), and it has a development lead in prostate cancer among all drugs in its class, the drug failed to effectively treat patients with an ATM mutation. Investors were hoping that Rubraca would earn a broader market opportunity than BRCA mutations, so the stock fell by double digits.
Later at ESMO, competitors AstraZeneca and Merck reported data for their PARP inhibitor, Lynparza, in ovarian cancer. The data were remarkable, headlined by more than doubling the number of women that experienced at least 36 months without their cancer progressing compared to placebo. If the data hold up in future studies, then the PARP inhibitor race in ovarian cancer is essentially a wrap. Clovis Oncology shares dropped another 20% on the news from the competition.
The last piece of negative news hit when Clovis Oncology reported third-quarter 2018 earnings. Rubraca is not living up to its potential as a maintenance therapy for ovarian cancer, generating just $23 million in quarterly revenue. That, and expensive clinical trials, led to an operating loss of $237 million in the first nine months of 2018. Shares fell nearly 30%.
Now what
The sky is falling for Clovis Oncology right now. Well, according to Wall Street anyway, although pessimism is probably the correct reaction to a woeful month of news. The company appears likely to win the PARP inhibitor race in prostate cancer, but also seems to have lost in ovarian cancer. Plus, with the incredible results of Lynparza in ovarian cancer, can it leapfrog Rubraca in prostate cancer? Given the uncertainty in the clinic and the massive operating losses piling up, investors decided to move their money elsewhere. That might be a good idea until more is known about how things will shake out in the competitive landscape.
