- Shares in Clovis Oncology fell in early trading Tuesday following a downgrade from SVB Leerink, which noted "concerns about the company's use of cash and solvency amidst an increasing mountain of convertible debt."
- A $12 million deal for a preclinical cancer drug, announced by Clovis Monday, may distract from addressing competitive threats to the company's only marketed product, Rubraca, according to Leerink analyst Andrew Berens.
- Results due this month from Rubraca's competitors Lynparza and Zejula in early treatment of ovarian cancer may also weigh on Clovis' prospects, Berens wrote. That data will be released Saturday at a European medical meeting.
Clovis has found itself outmaneuvered in the highly competitive PARP drug class. While AstraZeneca and GlaxoSmithKline have pushed into earlier lines of ovarian cancer treatment with their competitors Lynparza (olaparib) and Zejula (niraparib), Clovis has not been able to keep pace.
Data in first-line maintenance therapy from both of those treatments, along with a third agent still in the clinic, AbbVie's veliparib, will be unveiled at this weekend's European Society for Medical Oncology meeting.
As a result, Berens expressed disappointment that, instead of spending its cash to improve Rubraca's competitive position, Clovis is committing more than $12 million to private German biotech 3B Pharmaceuticals. The deal will give Clovis rights to peptide-targeted radionuclide therapies that won't be in the clinic for at least another year.
In addition to the usual upfront fee, royalties and milestones, Clovis will fund clinical trials and pay for some 3B employees and external costs during preclinical development. Clovis said the deal will not change its expected R&D expenditures for 2019.
Berens said the deal's price doesn't look "exorbitant," but he added: "It burdens Clovis with development expenses and milestones at a time when equity investors are increasingly concerned that the company is not aligned with their best interests."
Among the pressures on Clovis shares is the fear that it will not be acquired by a big pharma, as GlaxoSmithKline did with Tesaro to gain rights to Zejula. Clovis debt also approaches $700 million and Berens does not forecast a standalone Clovis will become profitable before 2024.
Meanwhile, the first legal challenges to Rubraca's intellectual property could emerge by the end of next year, raising the prospect of generic competitors down the road.
Berens downgraded his rating of Clovis shares from "outperform" to "market perform" and cut the price target from $22 to $10. Shares fell 10% in morning trading to $4.15.