Clovis Oncology Inc (CLVS - Free Report) shares declined more than 12% on Oct 8. A day earlier The Goldman Sachs Group, Inc. (GS - Free Report) reportedly lowered its price target from $13 to $3 and maintained its “Sell” rating for Clovis. An analyst at Goldman Sachs cited rising competition that will hurt Clovis’ top line as the reason for a lower price target.
The rating company stated that longer-term consensus estimates for Clovis were based on growth in sales of Rubraca, a PARP inhibitor, following potential label expansions in prostate cancer and first-line maintenance setting for ovarian cancer in combination with Bristol-Myers’ (BMY - Free Report) PD-1 inhibitor, Opdivo.
Please note that Rubraca is the sole marketed drug in Clovis’ portfolio. This PARP inhibitor is approved as a maintenance treatment for recurrent ovarian cancer, irrespective of BRCA-mutation, in second-line setting. The drug is also approved as third or later-line treatment for BRCA-mutant ovarian cancer.
Llast month, AstraZeneca and Merck presented encouraging data from two phase III studies — PROfound and PAOLA-1 — evaluating their PARP inhibitor, Lynparza, in patients with prostate cancer and first-line maintenance setting for ovarian cancer, respectively. Competitive data from these studies on Lynparza creates a challenging setup for Rubraca which has led Goldman Sachs to reduce sales estimates for Rubraca by a fourth. The rating company also stated that high cash burn and debt burden to support label expansion of Rubraca will also put pressure on Clovis’ margin.
Clovis’ stock has declined 82.4% so far this year compared with the industry's decrease of 8.5%.
Although sales of Rubraca registered strong year-over-year growth in the first half of 2019, competition is intensifying in the PARP inhibitor segment. Apart from Lynparza, two other FDA-approved PARP inhibitors — Pfizer’s (PFE - Free Report) Talzenna and Glaxo’s Zejula — are also available in the market. Glaxo has also successfully completed a late-stage study evaluating Zejula as first-line maintenance therapy for ovarian cancer.
Other PARP inhibitors are marketed by large-cap pharmaceuticals, which have strong cash resources to support expansion of their drugs. Successful development of Rubraca in additional indications is necessary for it to sustain momentum in a competitive field.
Clovis is diversifying its pipeline to ward off some competition. In September, the company signed a global licensing and collaboration agreement with privately-held, Germany-based biotech 3B Pharmaceuticals. The deal will grant Clovis rights to fibroblast activation protein alpha (FAP)-targeted radiopharmaceutical program.
Clovis currently carries a Zacks Rank #4 (Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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