Clovis (CLVS) Q3 Earnings & Sales Lag, Rubraca Disappoints

Clovis Oncology, Inc.CLVS incurred an adjusted loss of $1.71 per share in the third quarter of 2018, wider than the Zacks Consensus Estimate of a loss of $1.60 and the year-ago loss of $1.24 per share.

Net revenues, entirely from Clovis' only marketed drug, Rubraca, were approximately $22.8 million in the quarter, down 4.2% sequentially, due to challenges in adoption in earlier-line setting. Revenues missed the Zacks Consensus Estimate of $30.12 million. The company had recorded total revenues of $16.8 million entirely from Rubraca sales in the year-ago quarter.

Clovis stated that Rubraca is failing to capture significant share in the second-line maintenance ovarian cancer market as it has to compete with PARP inhibitors as well as other approved therapies. This is hurting sales of Rubraca. The company expects Rubraca sales to be similar or slightly higher than $22.8 million in the fourth quarter. The Zacks Consensus Estimate for the fourth quarter is pegged at $40.24 million.

Shares of the company declined almost 19.7% in pre-market trading , on lower-than-expected sales of Rubraca and the disappointing guidance. Moreover, Clovis has underperformed the industry in the past six months. The stock has lost 63.2% compared with the industry's decline of 8.7%.

Operating Expenses & Cash Details

During the third quarter, research & development expenses increased 64.3% year over year to $63.9 million primarily due to increased expenses for clinical studies on Rubraca. Selling, general and administrative (SG&A) expenses escalated 21.4% year over year to $42.5 million, reflecting increased activities to support commercialization of Rubraca in the United States as well as Europe.

Cash used in operating activities in the quarter was $72.5 million, higher than $45.8 million in the year-ago quarter.

Clovis ended the quarter with $604.4 million of cash equivalents and available-for-sale securities compared with $682.2 million as of Jun 30, 2018.

Update on Rubraca

In July 2018, the European Medicines Agency ("EMA") accepted the regulatory application for the label expansion of Rubraca to include maintenance treatment in recurrent ovarian cancer. A European approval for maintenance setting is expected in early 2019. The drug was launched for a similar indication in the United States in April. The EMA approved the drug for ovarian cancer patients with BRCA-mutation in third- or later-line setting in May.

The company is actively working on expanding the label of Rubraca in and beyond ovarian cancer. The company is evaluating Rubraca as monotherapy or in combination with immunotherapies - Bristol-Myers' BMY Opdivo or Merck's MRK Tecentriq - in multiple clinical studies in additional indications including first-line ovarian cancer, prostate and breast cancer. In August, a phase III study was initiated to evaluate Rubraca - Opdivo combo in advanced ovarian cancer.

In October, the company presented encouraging initial data from phase II TRITON2 study evaluating Rubraca in metastatic castration resistant prostate cancer.

Apart from Rubraca, Clovis is also developing lucitanib for treating breast and lung cancer. Clovis now owns global (excluding China) development rights for lucitanib, as its partner returned the ex-U.S. rights during the quarter.

Our Take

The adoption of Rubraca in manitenance setting in the United States was dismal. The company is facing challenges for the expansion in early line of therapy and the PARP inhibitor market has stagnated. The company may also face similar challenges in Europe if Rubraca gets approval in maintenance setting. Rubraca competes with Tesaro, Inc.'s TSRO Zejula and AstraZeneca's Lynparza in its approved indications.

Operating expenses are expected to rise in 2018 as the company will incur higher investments to support Rubraca's launch in Europe and expanded indication in the United States.

Clovis Oncology, Inc. Price, Consensus and EPS Surprise

Clovis Oncology, Inc. Price, Consensus and EPS Surprise | Clovis Oncology, Inc. Quote

Zacks Rank

Clovis currently has a Zacks Rank #4 (Sell).

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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