Shortly after GlaxoSmithKline bought PARP-inhibitor innovator Tesaro for $5.1 billion in early December, analysts started buzzing about the likelihood that Clovis Oncology would be the next PARP player to get scooped up at a high premium.
Now Clovis CEO Patrick Mahaffy is making it clear he’s ready to deal.
“Everybody knows where to find me and every company in this industry is for sale,” he said during a Q&A session after his presentation at the J.P. Morgan Healthcare Conference. “We just are. It’s all a question of whether somebody shows up.”
Mahaffy prefaced the comment by saying he didn’t want to “sound snarky.” But snarkiness aside, Mahaffy’s response to the ongoing buyout speculation was certainly timely. The conference kicked off with the news that Eli Lilly plans to buy Loxo Oncology for $8 billion, and that deal came just four days after the year’s first megamerger: Bristol-Myers Squibb’s planned purchase of Celgene for $74 billion.
Both of those marriages demonstrated that not only has the long-predicted M&A boom in biopharma arrived, but that oncology assets are among the most highly valued in the industry. Analysts predict that M&A will be driven by the combination of ready cash and recently depressed valuations of hot takeover targets—Clovis’ share price, for example, plunged from over $46 to about $18 in the six months leading up to J.P. Morgan.
RELATED: With Tesaro off the block, will Clovis be the next PARP maker to get swallowed up?
Fact is, Clovis could use a big partner to help market its main asset, ovarian cancer therapy Rubraca. The company has struggled to set the drug apart from its PARP competitors, which include AstraZeneca and Merck’s Lynparza. Much of the loss of value in Clovis’ stock came after its third-quarter report, when it revealed that sales of Rubraca had been just $22.8 million—much less than the $31.3 million analysts had expected.
During his presentation at J.P. Morgan, Mahaffy told analysts to expect Rubraca to bring in at least $30.3 million in sales in the fourth quarter and $95.3 million for the year. Still, significant marketing challenges remain.
Despite clinical trials showing impressive improvements in progression-free survival with Rubraca, key opinion leaders still don’t perceive a significant difference between the product and its rivals, Mahaffy said: “It’s been hard, even with the great PFS we have, to have differentiation that would drive greater adoption of Rubraca.”
RELATED: Bristol-Myers, Celgene CEOs trot out detailed case for $74B megadeal
Mahaffy described a new marketing plan Clovis is launching called “assess, confirm, treat.” The idea is to move beyond progression-free survival and instead focus on the fact that Rubraca produces additional tumor shrinkage over time, he explained. “The basic idea is to create a call-to-action in the maintenance setting in a way that is self-evident in the treatment setting, and to create a sense of urgency” among physicians who might have taken a watch-and-wait approach rather than keeping patients on a PARP inhibitor, he said.
Still, Mahaffy conceded that being a small player puts Clovis at a disadvantage in the market to products like Tesaro’s Zejula, which is now backed by the GSK development and marketing machine. Tesaro has long been a “very aggressive, very capable marketer,” he said, noting that it had been spending twice as much on sales and administrative functions than Clovis does.
Over the long run, with GSK’s resources, “if they choose to, they can put resources into a lot more clinical development programs than we can,” Mahaffy said, which could lead to additional approvals for Zejula “and therefore advantages.”
RELATED: Clovis should put itself up for sale, activist Armistice says: report
It isn’t just the analysts at J.P. Morgan who have been pressing Mahaffy to consider a sale. Shareholder Armistice Capital has been boosting its ownership stake in Clovis and now holds 9.8% of the company. In a filing to the Securities and Exchange Commission late last year, Armistice said it’s weighing a number of actions, one of which might be “recommending business development transactions including a sale,” it said.
One major selling point for Clovis could be the potential approval of Rubraca in prostate cancer. Clovis nabbed breakthrough status from the FDA in that indication, and Mahaffy confirmed during J.P. Morgan that the company hopes to file for that approval by the end of this year. Clovis is expected to be ahead of its rivals in the market for PARP inhibitors to treat prostate cancer.
An acquisition of Clovis would be better for shareholders than, say, an equity financing or something else that could be dilutive, one analyst suggested during the Q&A session at J.P. Morgan. Mahaffy said the company isn’t considering an equity offering.
As for the acquisition buzz, he said, “the reality is we’re open to it. … In the meantime, we’re going to create value.”