Dive Brief:
- Cancer biotech Clovis Oncology, along with its CEO Patrick Mahaffy and former CFO Erle Mast, will settle charges brought by the Securities and Exchange Commission on Tuesday accusing the company and its execs of misleading investors over the prospects for its cancer drug rociletinib.
- Clovis will pay $20 million to resolve the charges, while Mahaffy and Mast both agreed to pay financial penalties totaling about $800,000 between them.
- The SEC's charges center on claims Clovis made about the efficacy of rociletinib while the company went through the process of raising nearly $300 million in a stock offering. According to the complaint, Mahaffy and Mast learned the drug was much less effective than previously disclosed, even as the company continued to tout the more flattering numbers.
Dive Insight:
In later May 2015, at the closely watched annual meeting of the American Society of Clinical Oncology, Clovis made a presentation to investors that detailed an overall response rate of about 60% for rociletinib in a certain type of lung cancer.
The only problem? Those findings were unconfirmed, meaning the tumor shrinkage observed in patients wasn't yet substantiated through a follow-up scan. Subsequent analysis by Clovis researchers turned up a substantially lower ORR number, while later scans showed an even smaller rate.
But the company still put out a prospectus to investors quoting the 60% rate, and Mahaffy and Mast didn't disclose the lower numbers in conference calls supporting the company's stock offering, the SEC alleges.
Six months later, when Clovis disclosed the final ORR of 28% for the purposes of a potential application to the Food and Drug Administration, shares in the company plummeted by about 70%.
Clovis dropped development of rociletinib in May 2016, as it expected a Complete Response Letter from the FDA after an agency advisory panel voted 12-1 against recommending approval for the drug.
In line with this, the company also withdrew its marketing authorization application with the European Medicines Agency and terminated enrollment in all studies. The company cut 35% of its staff and contractor positions at the same time.
Clovis Oncology's stock barely flickered on the news of Tuesday's settlement, but that may be because it is already in the doldrums. From an all-time high of $114.39 in September 2015, its shares have fallen sharply and now sit just above $30 per share. The decline has continued throughout 2018, with its value more than halving year-to-date.
Currently, the company only has one drug on the market, Rubraca (rucaparib), a PARP inhibitor initially given accelerated approval as third-line treatment for BRCA-mutant ovarian cancer in the U.S. in December 2016. Rubraca was this year OK'd for maintenance treatment of recurrent ovarian cancer in patients with the BRCA mutation.
U.S. sales for Rubraca amounted to $23.8 million in the second quarter of 2018, up from $14.6 million in the same quarter in 2017.
Clovis has a lot riding on Rubraca, upping the importance of ongoing studies in prostate and bladder cancers, as well as in combo with Bristol-Myers Squibb's Opdivo (nivolumab).