Shares of Clovis Oncology (NASDAQ:CLVS) are under enormous pressure this morning. The biotech's stock was down by 11% as of 11:25 a.m. EDT.
What's behind this latest weakness? Clovis' shares are getting hammered as a result of the ongoing novel coronavirus sell-off, which is crushing most small-cap biotech stocks at the moment. Clovis, in particular, seems to be getting special attention from the moody market today because of its inability to turn a profit or even curtail its hefty quarterly net losses, despite having a high-value ovarian cancer drug (Rubraca) already on the market.
On top of all that, the steep plunge in crude oil prices is only adding to investors' unease.
The key risk factor with this company is its rapidly shrinking cash runway. At the end of the fourth quarter of 2019, Clovis' estimated cash runway stood at about 18 months. Now, the biotech might be able to markedly improve its financial outlook if Rubraca can score a regulatory approval as a treatment for BRCA1/2-mutant recurrent, metastatic castrate-resistant prostate cancer this coming May.
This second indication, after all, could be a game-changer for the drug from a commercial standpoint. That being said, Clovis is definitely in "prove it" mode with investors. The company has repeatedly failed to meet expectations on a number of fronts, and there's no guarantee that it will deliver a win for shareholders even with an expanded label for Rubraca in hand.
If all the stars align, Clovis' shares might be trading at just 1.2 times next year's sales after today's double-digit drop. That's bargain territory to be sure. Nonetheless, this risky biotech stock is still only suited for investors with a sky-high tolerance for risk and volatility, despite its rather attractive valuation.