Clovis Oncology Inc (NASDAQ:CLVS) has been one of the more interesting stories over the past month in the biotech space. As we discussed in our piece on October 20, the company recently reported seeming positive data on its PARP inhibitor, Rubraca, which is really the company’s principal asset.

Rubraca is already approved to treat ovarian cancer. The company has been pushing it towards a possible expanded indication to include two specific types of prostate cancer – one related to a very specific genetic mutation (called an “ATM alteration”) and the other, BRCA-positives. However, even after seemingly positive data on its latest run, the stock imploded.

Clovis Oncology Inc (NASDAQ:CLVS) just reported earnings and the only thing the market seemed to care about was a miss on the sales side for Rubraca. Despite growing sales at nearly 36%, the number was under the target from analysts.


The Rub

The company also gave away nearly $10M worth of the drug during the quarter, and reported a net loss of nearly $90M. The company has just north of $600M in cash and marketable securities and has lost almost half that much so far this year.

On the free drug supply, the company noted on its conference call that, “The supply of this free drug represents approximately 30% of overall commercial supply up from the approximately 25% reported for the second quarter of 2018. Absent relevant funding of the foundation that had historically provided copay assistance to these patients, this will likely continue at this level. While we remain confident in Rubraca’s potential in the second line maintenance indication, we recognize that PARP inhibitor penetration in this setting appears to remain relatively flat at approximately 35% to 40%. In addition to growing this market we also need to grow our share of the overall PARP market which we estimate is approximately 20% today.”

In other words, the stock is diving because the company is spiraling toward insolvency within 24 months if something doesn’t change.

That brings us to the positive ESMO update and why the CEO seemed to downplay those results. The market appears to have faltered on confidence that the expanded indications were realistic, putting the stock on course for a date with very serious tough times.

However, we would also point out that, right now, sentiment on this stock probably couldn’t be worse than it is. It’s as if people are simply starting to write this one off. But it has a promising drug with the potential to become the first ever PARP inhibitor to jump across to prostate care.

And the company has exclusive rights to that IP.

It is not impossible that this could become a powerful opportunity around the next corner, particularly when we see more granular results for current research in Q1 2019. We aren’t writing it off even though we acknowledge some of the struggles ahead for CLVS given the relative trends between overall losses, percent of gross supply dealt free, and growth rate in ovarian cancer rubraca sales.

There is a delicate balance that has been tipping the wrong way over the past 3 months. But the promise underlying the technology still may have a rabbit in its hat.

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