Q3 2020 Clovis Oncology Inc Earnings Call

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Ladies and gentlemen, thank you for standing by and welcome to the Clovis oncology third quarter financial results Conference call.

This time, all participants are in a listen only mode.

After the speaker presentation, there will be a question and answer session.

Call, we may make forward looking statements within the meaning of the federal securities laws, including statements concerning our financial outlook and expected business plans.

All of these statements are subject to risks risks and uncertainties that could cause actual results to differ materially from those described in forward looking statements.

Our actual results could differ materially due to a number of factors, including the extension duration of the effects of the code of 19 pandemic.

Please refer to our recent filings with the SEC for a full review of the risks and uncertainties associated with our business.

Forward looking statements speak only as of the date on which they are made and Clovis undertakes no obligation to update or revise any forward looking statements.

Additionally, we will be discussing cash burn on non-GAAP financial measures. During today's conference call required disclosures related to this are in today's news release, which can be found on our website.

Now ill turn the call over to Pakistan to happen, but.

Good morning, welcome everybody, but we appreciate your time bodies I understand it's a pretty busy earnings day.

Despite the ongoing effects of co relate to unit oncology practices, we achieved 38.8 million in Q3 revenues and achieve year over year sales growth.

Today, we are also providing fourth quarter guidance for 3 million to $40 million in line. The third quarter revenues as we anticipate the ongoing impact of COVID-19 on patient diagnosis patient visits and access to oncology practices to continue.

Reflecting particularly on issues related to incur some excess by sales reps and significant changes and how physicians increasingly prefer to access information related to commercial products I'll discuss some changes, we're making to our us commercial strategy with the goal of returning to growth as rapidly as possible, especially as the ongoing impact of Covance is resolved over.

Hi.

I'll begin with the quarter's commercial update for Rebecca our global net revenue for the third quarter of 2020 was $38.8 million Dan will describe these results in greater detail.

Broadly we saw year over year growth and on a sequential basis softening in us revenues and growth in us and growth in ex us revenues compared to the prior quarter.

Importantly, about half of the U.S sequential decline from Q2 to Q3 was increased gross to net adjustment and the other half was due to lower volumes, primarily due to increased free goods.

Of course in each of Q2 in Q3 revenues were impacted by COVID-19, due to fewer diagnoses and fewer patients going to in person office visits as oncology practices in patients continue to adapt to the impact of the buyers.

Commercial division starts in Q3 were consistent with what was observed in Q2.

And additional effects of COVID-19 facilities have substantially accelerated what was already a trend towards reduced in person access by sales reps.

We believe this reduced access to oncology practices will continue even once the pandemic is ultimately control as practices increasingly prefer digital programming in communication that can be accessed on their own time.

Accordingly, we have adopted a new commercial strategy to meet these preferences.

Our new strategy embraces a hybrid approach that elevates easily accessible digital programming.

Virtual communication and peer to peer interactions.

In person promotion will be reduced.

And those remaining in person activities will be much more targeted.

The cyber strategy does not require as larger us commercial organization. So we've made the difficult decision to reduce the size of our organization by approximately 45 employees.

As a result, our us commercial team now numbers approximately 85 people.

For those of you may wonder if this reflects a reduced commitment to Rebecca it is in fact the opposite.

We are energized about this new strategy and believe that we are in fact, an early adopter of the trend will be increasingly common from college and marketers.

While we do anticipate a net cost savings of approximately 10 million on an annual basis due to this reduction including the effect of an increased investment in digital promotions, but not the primary driver of these changes.

We are adopting this hybrid strategy in order to better reach physicians the way they want to be reached utilizing resources customized to their practices with the goal of returning to growth in particular, the ongoing impact of the virus resolves over time.

Turning to Europe, we did see our best sales performance ever during the third quarter.

While we are pleased with our progress in Europe as you've all read like in the United States Overlay team has made a significant return to Europe in clinics added we opened two in person promotion or again shutdown.

It is hard to predict the impact of the second lockdown cancer patient visits and diagnoses.

With regard to adopting a similar hybrid model in Europe, we already have a smaller commercial organization and have been utilizing virtual communication in each of our primary territories as regulations allow.

National regulations variable on European countries, and as compared to the United States. So that would also be much more complicated says up exactly the same hybrid model in Europe as we are doing in the United States.

In late August Foundation Medicine was granted FDA approval for the foundation, one liquid Cdx companion plasma based diagnostic for multiple indications, including Rebecca.

Prior to this other diagnostics were available, but we could not actively promote them.

We don't know presently where this combination may fit into gilead priority.

You as well as the first major conference presence of our increasing pipeline activities and we anticipate multiple clinical development and regulatory milestones for our pipeline compounds in 2021.

I'll highlight some of them here.

Fully black and we anticipate clinical data from the Athena monotherapy arm in the second half of 2021. Following the successful completion of enrollment in the phase III 1000 patient study and frontline newly diagnosed advanced ovarian cancer earlier this year.

With the piano, we believe we are uniquely positioned to evaluate Rebecca in terms of two outcomes.

First as monotherapy versus placebo in the frontline maintenance setting in the HIV population inclusive of breakup and and the all comers or intend to treat population.

As well as any potential advantage of a company Smith refractor, NLP, though secondly, and the same patient population.

Theme is the first frontline switch maintenance study designed to show both monotherapy and park PD, one combination therapy from one study design.

I will take a moment to review the analysis plan for Athena.

First expected in the second half of 2021 will see the results of Rebecca monotherapy versus placebo, but I'll study population.

Commence enrollment soon.

Let me turn to Lucitanib, which of course is our investigational Andrew Denis this inhibitor, which inhibit vascular endothelial growth factor of sectors, one through three lately.

Platelet derived growth factor receptor alpha and beta and fibroblast growth factor receptor is one through three.

In addition to the racket and Opdivo combo is being evaluated our clinical collaboration with Bristol Myers Squibb includes both ongoing and planned combination of Opdivo lucitanib.

The Clovis sponsored Leo one study is a phase one of the two study evaluating.

We submitted in combination with Opdivo.

Results from this study along with preclinical data we are generating are expected to help inform selection of tumor types for our planned phase two expansion cohorts.

About half of the U.S sequential decline from Q2 to Q3 was increased gross to net adjustments and the other half was due to lower commercial volumes, primarily due to increased free goods.

The effective COVID-19 on our business and operating results are difficult to assess or predict in particular, given the increase in cases in major markets in the us in Europe.

As our guidance of 38 million to 48 40 million suggests we anticipate a continued impact on revenues related to COVID-19 for the remainder of 2020.

Gross to net adjustments totaled 25.1% in Q3 2020 compared to 19.4% in Q2 2020, the sequential increase in gross to net adjustments reflects primarily an increase in the U.S contracting in government related programs and increasing ex us net revenues, which have a higher percentage gross to net compared.

To the U.S.

Gross to net is 22.4% for the year through the end of the third quarter and it fluctuates quarter to quarter. It is difficult to estimate on future revenues, but a range of the low to mid 20% seems likely depending on the revenue and distribution mix for the us on year.

Additionally, our free goods percentage increased from 16.5% in Q2 to 20.9% in Q3.

Weeks of distributor inventory was comparable at the end of Q3 versus Q2, so no meaningful impact.

Research and development expenses totaled $62.9 million for Q3, 2020 compared to $77.9 million for the third quarter of 2019 R&D.

R&D for the first nine months of 2020 totaled $201 million compared to $210.7 million for the first nine months of 2019.

R&D expenses were lower in the quarter and the first nine months of 2020 compared to 2019, primarily as a result of lower spending on real bracket clinical trials.

We expect research and development expenses to be lower in the full year 2021 compared to 2020.

Selling general and administrative expenses totaled 38.6 million for Q3, 2020 compared to $41.8 million for Q3 2019.

Selling general and administrative expenses for the first nine months of 2020 was $123.1 million compared to $137.6 million for the first nine months of 2019.

For efficacy 20 to 86 by the end of this year.

2021, we anticipate the following milestones.

Initial monotherapy data from the Athena study, which is the front first frontlines, which maintenance study designed to evaluate part monotherapy and PARP plus PD one combination therapy in one study design.

Presentation and interim data from the legal one combination study of Lucitanib vivo at medical meetings.

Sufficient data from the Rebecca Lodestar trial to support a potential filing for targeted gene and tumor agnostic supplemental and BA.

And initiation of the phase one clinical program for APB 20 to 80 cents.

And probably in most of our territories there may be a clinic.

Maybe a physician who would be willing to see.

A sales rep.

But for the most part it's a really limited number now and I will tell you I think it is not as productive as in person meeting.

Meetings allow you to go into the clinic and talk to the nurses and the administrators and hope to get a little time with the physician.

It's hard to arrange all of them on zoom calls or what's half in Europe.

The switch we've made in the United States, which which we initiated in October.

Is is too target or in person promotion overtime.

A smaller number of physicians, who we know are active are inhibitor writers.

And to augment that with a significant amount of digital communication, which can be anything from banner.

Banner ads too.

Peer to peer communications in chat rooms, but allow the physician to access the information he or she desires to get.

In a message that they prefer and.

And at the time of their own choosing not not just window rep maybe.

Trying to schedule a call.

We have been a ton of time.

On the development of this hybrid model, we made the painful decision to to reduce our commercial organization by 45.

Could be.

We think this is targeted group will be more effective and be.

Highly aided by the digital approaches we began to initiate in October and will continue to rule out over the course of this quarter and into next year.

Okay. Thank you and then you think about I think 20.

<unk> and then finally I need that.

And your client therapies are driving you expect anything for it as modern guarantee their and the potential combination that you get and what kind of combination that makes sense.

Yeah.

So as I suspect almost any development program, we will initially.

Evaluate 2036 as monotherapy.

We think we would be able to deliver activity and that could lead to greater activity for our number two priorities I can and number three would be a combination.

Either allude to some or activity in label.

2026, with a PD one.

People anti PD one antibody.

Great. Thank you.

The.

Your next question comes from the line of Andrew Baron with SBB being rank.

Thanks, I'm, sorry, if I missed some of my prepared comments, but the juggling a number of calls.

I was wondering if you could share any of the commercial metrics you have regarding the prostate cancer expansion improved baca, how is the PARP class doing as a whole and what market share do you have and then I do have a question on wordstar in a tumor agnostic label after after that it's OK.

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Yes.

We don't have good metrics yet Andy on market share. We are we are definitely behind astrazeneca.

They have a better label than we do when they were given by FDA.

All of those mutations beyond BRCA.

It is created a disadvantage for us, which we have to acknowledge.

I think utilization.

We'll increase of PARP inhibitors in.

Prostate cancer and has been adopted by in particular as many urology practices.

I think that our share will be low until we get through the.

Our own ongoing phase three study.

Which would allow us potentially to add an additional mutation, which lithium indefinitely earlier line.

It's going to start impacting on on second line maintenance studies.

Secondly, maintenance excuse me use.

And I forgot the last part of your question. So if you can answer the last part again ill answer.

Yes, yes sure no that was helpful. But the last part was just around Fourq guidance and your assumptions there whether you expect to see something similar with regards to you as new trends or are they expected to be stable quarter over quarter in both geographies.

We think we're going to be stable.

I think in the expansion cohort and I think that that reflects on the great desire for new options.

New treatment options in gynecological cancers.

We we do not think we are going to see a meaningful impact on that continuing enrollment even.

Even with the resurgence in the United States. The majority of the of that trial effect, maybe all of the center. So far are in the United States, but we we aren't anticipating.

And impacted obviously cobot already get completely out of hand, and it could be but at its present rate, we don't due to an expected impact.

Okay, great. Thank you.

And then on your part.

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Hi can you at this time there are no further question I would like to turn it back over to an assessment for closing remarks.

Thank you.

Thanks, everyone for your interest and your time today.