Will Clovis' Rubraca sales shortfall revive talk of a buyout at J.P. Morgan?

Rubraca AstraZeneca
Clovis told analysts to expect Rubraca sales to come in between $38.3 million and $39.3 million in the fourth quarter of 2019, falling short of projections for the product. (Clovis Oncology)

Last year at the annual J.P. Morgan Healthcare Conference, Clovis Oncology CEO Patrick Mahaffy didn’t mince words in his response to questions about whether he would entertain buyout offers for his company, which was considered a hot target because of its sole marketed product: the PARP inhibitor Rubraca to treat ovarian cancer.

“Everybody knows where to find me and every company in this industry is for sale,” he said at the time.

A year later, Clovis is still an independent company with one product—but it's a drug that's struggling to live up to Wall Street’s high expectations. So as Clovis heads to San Francisco for this year’s J.P. Morgan confab, that nagging question about whether the company should hang up a “for sale” sign could very well come up again.

Clovis expects Rubraca sales for the fourth quarter to come in between $38.3 million and $39.3 million, missing the consensus analyst expectation of $40.5 million, it said Tuesday. The company’s stock fell 8.4% to $8.47. The slide followed a turbulent 2019, when Clovis’s shares fell from $24 to $3 before starting a late-year climb that may have been partly fueled by M&A speculation.

RELATED: Clovis investors lose faith as Rubraca struggles against Big Pharma's marketing giants

One main challenge Clovis continues to battle is competition. Rubraca is approved to treat women with recurrent ovarian cancer who have previously responded to chemotherapy, but Clovis has struggled to set the drug apart from GlaxoSmithKline’s Zejula and AstraZeneca and Merck's Lynparza.

“Despite impressive data, market growth in [maintenance] settings has been slower than we and the market anticipated,” wrote J.P. Morgan analysts in a note to clients following Clovis’s Tuesday announcement. The firm lowered its Rubraca sales expectations for the year, predicting the drug would pull in about $143 million.

Clovis’s biggest opportunity for growth will hinge on its ability to expand the market for Rubraca. During its announcement, the company said it submitted an application to the FDA for the approval of the drug to treat BRCA-positive prostate cancer in November, following up on an earlier promise to make that filing by the end of 2019.

That gives Rubraca a head start on its rivals in prostate cancer, a lead that Clovis hopes to lock up with positive clinical trial data. The company nabbed a breakthrough designation from the FDA in October 2018 after posting results showing Rubraca produced a 44% response rate in prostate cancer patients with BRCA 1/2 mutations.

Still, success in the prostate cancer market is in no way guaranteed for Clovis. In October of last year, the FDA handed Zejula a breakthrough tag in BRCA-positive prostate cancer based on clinical trial data showing a 41% response rate.

AstraZeneca and Merck are shaping up to be tough contenders in the prostate cancer market, too: They presented data at the recent European Society for Medical Oncology (ESMO) annual meeting showing that Lynparza could reduce the risk of death by 66% in men with prostate cancer that carries either BRCA or ATM mutations. J.P. Morgan declared that data “incrementally negative to Clovis.”

RELATED: GSK and AZ-Merck's PARP drugs scored at ESMO. But where does that leave Clovis' Rubraca?

Clovis had plans to expand Rubraca’s target market to include bladder cancer, but it pulled the plug on that strategy last April after preliminary data from a trial of the drug as a solo treatment proved disappointing.

Nevertheless, Clovis’ name continued to pop up as a top target of M&A speculation throughout 2019. Last summer, Evercore ISI analysts listed a potential buyout as a major positive for Clovis in a note they sent to investors. And when RBC Capital Markets analysts asked their clients to name the companies they thought were most likely be taken out, Clovis showed up once again.

So how will Mahaffy respond if he faces the M&A question at this year's J.P. Morgan conference? Stay tuned. The company is scheduled to present there on January 13.

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