What happened

Shares of Clovis Oncology (NASDAQ:CLVS) soared over 21% today after the company announced product revenue for the fourth quarter and full-year 2018. The preliminary operating results centered on the company's key asset, Rubraca, which picked up steam in the final quarter of the year with an estimated $30.5 million in sales. That compares favorably with just $22.8 million in revenue delivered in the third quarter of 2018. 

For the full year, Rubraca achieved an estimated $95.5 million in revenue, compared with only $55.5 million in 2017. While the drug still isn't living up to its lofty potential, the strong end to the year provides hope that Clovis Oncology can hit the ground running in 2019. That may be a little easier to do with an estimated $519 million in cash, cash equivalents, and securities available for sale, but significant operating losses will be difficult to erase overnight.

As of 11:56 a.m. EST, the stock had settled to a 19.3% gain.

A man holding an arrow cutout pointing up.

Image source: Getty Images.

So what

The preliminary operating results are a much-needed shot in the arm for Clovis Oncology, especially when considering the competitive landscape. Rubraca is one of three PARP inhibitors on the market today -- the other two being Lynparza from AstraZeneca and Merck, and Zejula from Tesaro -- approved as late-stage treatments for certain cancers with a genetic mutation known as BRCA. In other words, the market opportunity in the crowded drug class is relatively limited. But that could soon change.

All PARP inhibitor currently on the market (and a handful of promising new candidates from around the industry) are being evaluated in clinical trials aiming to tease out whether they'll hold up as first-line treatments for certain types of ovarian and prostate cancers. The early results so far have been encouraging enough for analysts to throw around projections of multibillion-dollar market opportunities for the drug class, although the lion's share of the bounty may go to the first to hit the market. Investors have been increasingly pessimistic that will be Rubraca.

Lynparza has delivered impressive results in a clinical trial for BRCA-mutated ovarian cancer, while Zejula was promising enough for GlaxoSmithKline to acquire Tesaro for $4.2 billion. Then there's the start-up Ribon Therapeutics, which recently pulled the cloak off its stealthy operations with a $65 million fundraising round. It's developing a promising next-generation PARP inhibitor that works a little differently than the three above and has attracted investments from Novartis, Johnson & Johnson, and Celgene (set to be acquired by Bristol-Myers Squibb). Thus, the future of the drug class may be even more crowded than the present.

Now what

Clovis Oncology was increasingly looking like the odd one out in the crowded PARP-inhibitor field, but a promising end to the year for Rubraca and relatively promising data from a clinical trial in prostate cancer released in late 2018 could sharpen its prospects in the new year. Given the recent flurry of mergers and acquisitions, some have even suggested that the company is a ripe takeover target. One big wrench in that thesis has been the fact that the business posted an operating loss of $174 million through the first nine months of 2018. If Rubraca can get back on a solid growth trajectory, then a larger peer could be willing to squint to make the numbers work out. Speculation in pharma is a dangerous game for individual investors, however.

Check out the latest Clovis Oncology earnings call transcript.