Clovis Oncology, Inc.
CLVS
announced that the company and some of its subsidiaries initiated voluntary prearranged Chapter 11 proceedings in the U.S. Bankruptcy Court for the Southern District of Delaware (“Court”).
In the Court filing. Clovis has estimated its assets to be $100-$500 million, with liabilities between $500 million and $1 billion.
Last month, management had warned investors that a bankruptcy filing was plausible as recent regulatory developments impacted current revenues and the commercial potential of its sole-marketed drug Rubraca.
Since the onset of the year, Clovis has been facing continuing challenges in raising additional capital as a result of the uncertain market potential of Rubraca. Despite making efforts to secure funding, it failed.
Subject to Court approval, management has lined up a debtor-in-possession (DIP) financing facility of up to $75 million to provide it with the necessary liquidity to continue its normal day-to-day business operations throughout the bankruptcy proceedings.
Prior to the bankruptcy filing, Clovis also entered into a stalking horse purchase and assignment agreement with
Novartis
NVS
to sell the rights to its pipeline clinical candidate FAP-2286, which is in an early-stage study for multiple tumor types. Signing a stalking-horse agreement will allow a distressed company to avoid receiving low bids as it sells its final assets. It helps the company set a low-end bidding bar so that other potential buyers cannot underbid the purchase price.
Per the terms of the stalking horse agreement with Novartis, Clovis will be eligible to receive an upfront payment of $50 million. The company is also eligible to receive up to $333.75 million as development and regulatory milestone payments from Novartis. If FAP-2286 is approved, Clovis will be further eligible to receive $297 million as sales milestones from Novartis.
Management is also in discussions with several interested parties regarding a potential sale of one or more of its other assets.
Shares of Clovis have slumped 92.6% in the year compared with the
industry
’s 20.4% fall.
Image Source: Zacks Investment Research
As of September 2022-end, Clovis’ cash, cash equivalents and marketable securities were $58.3 million at September-end. Alongside its third-quarter 2022 results, management had announced that it will not have sufficient liquidity to maintain its operations beyond January 2023 based on current cash and cash equivalents and Rubraca revenue estimates.
Per management, Clovis has been facing several regulatory setbacks for its cancer drug Rubraca. These setbacks have impacted current revenues and the commercial potential of Rubraca.
Rubraca was also approved in the United States and Europe in the third or later-line setting in ovarian cancer. However, the company has voluntarily withdrawn approval for this indication in both markets. The decision to withdraw is based on data from the ARIEL4 post-marketing study, which linked Rubraca to an increased risk of death. While the approval in the United States was withdrawn with effect from June 2022, it was also withdrawn in Europe from September 2022.
Rubraca is currently approved in the United States and Europe as a second-line maintenance treatment for recurrent ovarian cancer in patients who respond (completely or partially) to platinum-based chemotherapy. Earlier this month, the company also announced that it had revised the drug’s label to treat tBRCA patients only, based on the FDA’s recommendation.
Due to these factors highlighting the uncertain market potential of Rubraca, Clovis is also facing continuing challenges in raising additional capital. In the first nine months of 2022, sales of Rubraca were $97 million, down 14% year over year.
A PARP inhibitor, Rubraca faces stiff competition from Lynparza, another PARP inhibitor jointly developed and commercialized by
AstraZeneca
AZN
and
Merck
MRK
. AstraZeneca/Merck’s Lynparza is approved for four cancer types, namely ovarian, breast, prostate and pancreatic cancers, in various patient populations. Merck and AstraZeneca are evaluating Lynparza across a range of tumor types. In the first nine months of 2022, Lynparza generated product sales of $1.95 billion for AstraZeneca and alliance revenues of $825 million for Merck.
Zacks Rank
Clovis currently carries a Zacks Rank #2 (Buy). You can see
the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here
.
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