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EX-32.2 - EX-32.2 - Clovis Oncology, Inc.clvs-20170331ex322af751a.htm
EX-32.1 - EX-32.1 - Clovis Oncology, Inc.clvs-20170331ex321b54f49.htm
EX-31.2 - EX-31.2 - Clovis Oncology, Inc.clvs-20170331ex312d11ed9.htm
EX-31.1 - EX-31.1 - Clovis Oncology, Inc.clvs-20170331ex3114163f7.htm
EX-10.39 - EX-10.39 - Clovis Oncology, Inc.clvs-20170331ex1039dd6f6.htm

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 


 

FORM 10-Q


 

 

 

 

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934.

 

For the quarterly period ended March 31, 2017.

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934.

 

For the transition period from            to           .

 

Commission file number: 001-35347

 


Clovis Oncology, Inc.

(Exact name of Registrant as specified in its charter)


 

(State or other jurisdiction of

 

Delaware

90-0475355

(State or other jurisdiction of

(I.R.S. Employer

incorporation or organization)

Identification No.)

 

 

5500 Flatiron Parkway, Suite 100

 

Boulder, Colorado

80301

(Address of principal executive offices)

(Zip Code)

 

(303) 625-5000

(Registrant’s telephone number, including area code)

 

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)


 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes      No  

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes      No  

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

 

 

 

 

 

Large accelerated filer

 

Accelerated filer

Non-accelerated filer

(Do not check if a smaller reporting company)

Smaller reporting company

 

 

Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Ace. 

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  

 

The number of outstanding shares of the registrant’s common stock, par value $0.001 per share, as of April 28, 2017 was 44,772,600.

 

 


 

CLOVIS ONCOLOGY, INC.

 

FORM 10-Q

 

TABLE OF CONTENTS

 

 

 

 

 

PART I. Financial Information 

3

 

 

 

 

ITEM 1. 

 

Financial Statements (unaudited)

3

 

 

 

 

 

 

Consolidated Statements of Operations and Comprehensive Loss — for the three months ended March 31, 2017 and 2016

3

 

 

 

 

 

 

Consolidated Balance Sheets — as of March 31, 2017 and December 31, 2016

4

 

 

 

 

 

 

Consolidated Statements of Cash Flows — for the three months ended March 31, 2017 and 2016

5

 

 

 

 

 

 

Notes to Unaudited Consolidated Financial Statements

6

 

 

 

 

ITEM 2. 

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

21

 

 

 

 

ITEM 3. 

 

Quantitative and Qualitative Disclosures About Market Risk

30

 

 

 

 

ITEM 4. 

 

Controls and Procedures

30

 

 

PART II. Other Information 

32

 

 

 

 

ITEM 1. 

 

Legal Proceedings

32

 

 

 

 

ITEM 1A. 

 

Risk Factors

35

 

 

 

 

ITEM 2. 

 

Unregistered Sales of Equity Securities and Use of Proceeds

36

 

 

 

 

ITEM 3. 

 

Defaults Upon Senior Securities

36

 

 

 

 

ITEM 4. 

 

Mine Safety Disclosures

36

 

 

 

 

ITEM 5. 

 

Other Information

36

 

 

 

 

ITEM 6.

 

Exhibits

36

 

 

SIGNATURES 

40

 

 

 

2


 

PART I. FINANCIAL INFORMATION

 

ITEM 1.FINANCIAL STATEMENTS

 

CLOVIS ONCOLOGY, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(Unaudited)

(In thousands, except per share amounts)

 

 

 

 

 

 

 

 

 

 

 

Three months ended March 31, 

 

 

    

2017

    

2016

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Product revenue, net

 

$

7,045

 

$

 —

 

Operating expenses:

 

 

  

 

 

  

 

Cost of sales - product

 

 

1,163

 

 

 —

 

Cost of sales - intangible asset amortization

 

 

372

 

 

 —

 

Research and development

 

 

32,447

 

 

74,608

 

Selling, general and administrative

 

 

29,224

 

 

9,827

 

Change in fair value of contingent purchase consideration

 

 

 —

 

 

516

 

Total expenses

 

 

63,206

 

 

84,951

 

Operating loss

 

 

(56,161)

 

 

(84,951)

 

Other income (expense):

 

 

  

 

 

  

 

Interest expense

 

 

(2,581)

 

 

(2,104)

 

Foreign currency losses

 

 

(159)

 

 

(551)

 

Other income

 

 

354

 

 

25

 

Other income (expense), net

 

 

(2,386)

 

 

(2,630)

 

Loss before income taxes

 

 

(58,547)

 

 

(87,581)

 

Income tax benefit

 

 

83

 

 

4,181

 

Net loss

 

$

(58,464)

 

$

(83,400)

 

Other comprehensive income:

 

 

  

  

 

  

 

Foreign currency translation adjustments, net of tax

 

 

467

  

 

3,513

 

Net unrealized (loss) gain on available-for-sale securities, net of tax

 

 

(5)

  

 

230

 

Other comprehensive income

 

 

462

  

 

3,743

 

Comprehensive loss

 

$

(58,002)

 

$

(79,657)

 

 

 

 

 

 

 

 

 

Loss per basic and diluted common share:

 

 

 

 

 

 

 

Basic and diluted net loss per common share

 

$

(1.33)

 

$

(2.17)

 

Basic and diluted weighted average common shares outstanding

 

 

44,039

 

 

38,360

 

 

See accompanying Notes to Unaudited Consolidated Financial Statements.

3


 

CLOVIS ONCOLOGY, INC.

CONSOLIDATED BALANCE SHEETS

(Unaudited)

(In thousands, except for share amounts)

 

 

 

 

 

 

 

 

 

 

 

March 31, 

 

December 31, 

 

 

    

2017

    

2016

 

 

 

 

 

 

 

 

 

ASSETS

 

 

  

 

 

  

 

Current assets:

 

 

  

 

 

  

 

Cash and cash equivalents

 

$

276,049

 

$

216,186

 

Accounts receivable, net

 

 

2,378

 

 

121

 

Inventories

 

 

6,504

 

 

 —

 

Available-for-sale securities

 

 

132,778

 

 

49,997

 

Prepaid research and development expenses

 

 

5,465

 

 

6,427

 

Other current assets

 

 

5,645

 

 

6,679

 

Total current assets

 

 

428,819

 

 

279,410

 

Property and equipment, net

 

 

4,226

 

 

4,440

 

Intangible assets, net

 

 

20,675

 

 

21,047

 

Goodwill

 

 

58,015

 

 

57,192

 

Other assets

 

 

24,879

 

 

2,468

 

Total assets

 

$

536,614

 

$

364,557

 

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

 

 

  

 

 

  

 

Current liabilities:

 

 

  

 

 

  

 

Accounts payable

 

$

23,918

 

$

10,912

 

Accrued research and development expenses

 

 

25,868

 

 

35,198

 

Other accrued expenses

 

 

9,083

 

 

19,487

 

Total current liabilities

 

 

58,869

 

 

65,597

 

Deferred income taxes, net

 

 

207

 

 

 —

 

Milestone liability

 

 

20,528

 

 

20,062

 

Convertible senior notes

 

 

281,443

 

 

281,126

 

Deferred rent, long-term

 

 

1,358

 

 

1,406

 

Total liabilities

 

 

362,405

 

 

368,191

 

Commitments and contingencies (Note 14)

 

 

  

 

 

  

 

Stockholders' equity (deficit):

 

 

  

 

 

  

 

Preferred stock, par value $0.001 per share; 10,000,000 shares authorized, no shares issued and outstanding at March 31, 2017 and December 31, 2016

 

 

 —

 

 

 —

 

Common stock, $0.001 par value per share, 100,000,000 shares authorized at March 31, 2017 and December 31, 2016; 44,769,756 and 38,724,090 shares issued and outstanding at March 31, 2017 and December 31, 2016 respectively

 

 

45

 

 

39

 

Additional paid-in capital

 

 

1,410,789

 

 

1,174,950

 

Accumulated other comprehensive loss

 

 

(47,118)

 

 

(47,580)

 

Accumulated deficit

 

 

(1,189,507)

 

 

(1,131,043)

 

Total stockholders' equity (deficit)

 

 

174,209

 

 

(3,634)

 

Total liabilities and stockholders' equity (deficit)

 

$

536,614

 

$

364,557

 

 

See accompanying Notes to Unaudited Consolidated Financial Statements.

4


 

CLOVIS ONCOLOGY, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands)

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended March 31, 

 

 

 

    

2017

    

2016

 

 

 

 

 

 

 

 

 

 

 

Operating activities

 

 

  

 

 

  

 

 

Net loss

 

$

(58,464)

 

$

(83,400)

 

 

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

  

 

 

  

 

 

Share-based compensation expense

 

 

8,947

 

 

10,965

 

 

Depreciation and amortization

 

 

639

 

 

270

 

 

Amortization of premiums and discounts on available-for-sale securities

 

 

214

 

 

80

 

 

Amortization of debt issuance costs

 

 

317

 

 

307

 

 

Change in fair value of contingent purchase consideration

 

 

 —

 

 

1,049

 

 

Loss on disposal of property and equipment

 

 

 —

 

 

169

 

 

Deferred income taxes

 

 

(60)

 

 

(4,145)

 

 

Changes in operating assets and liabilities:

 

 

  

 

 

  

 

 

Accounts receivable

 

 

(2,257)

 

 

 —

 

 

Inventory

 

 

(6,504)

 

 

 —

 

 

Prepaid and accrued research and development expenses

 

 

(10,047)

 

 

(7,601)

 

 

Other operating assets

 

 

(17,014)

 

 

(130)

 

 

Accounts payable

 

 

13,780

 

 

2,682

 

 

Other accrued expenses

 

 

(9,990)

 

 

(3,984)

 

 

Net cash used in operating activities

 

 

(80,439)

 

 

(83,738)

 

 

Investing activities

 

 

  

 

 

  

 

 

Purchases of property and equipment

 

 

(53)

 

 

(604)

 

 

Deposits for purchases of property and equipment

 

 

(2,515)

 

 

 —

 

 

Purchases of available-for-sale securities

 

 

(133,000)

 

 

 —

 

 

Maturities of available-for-sale securities

 

 

50,000

 

 

25,000

 

 

Acquired in-process research and development - milestone payment

 

 

(1,100)

 

 

 —

 

 

Net cash (used in) provided by investing activities

 

 

(86,668)

 

 

24,396

 

 

Financing activities

 

 

  

 

 

  

 

 

Proceeds from the sale of common stock, net of issuance costs

 

 

221,224

 

 

 —

 

 

Proceeds from the exercise of stock options

 

 

5,674

 

 

705

 

 

Net cash provided by financing activities

 

 

226,898

 

 

705

 

 

Effect of exchange rate changes on cash and cash equivalents

 

 

72

 

 

254

 

 

Increase (decrease) in cash and cash equivalents

 

 

59,863

 

 

(58,383)

 

 

Cash and cash equivalents at beginning of period

 

 

216,186

 

 

278,756

 

 

Cash and cash equivalents at end of period

 

$

276,049

 

$

220,373

 

 

Supplemental disclosure of cash flow information:

 

 

  

 

 

  

 

 

Cash paid for interest

 

$

3,594

 

$

3,594

 

 

Non-cash investing and financing activities:

 

 

  

 

 

  

 

 

Vesting of restricted stock units

 

$

2,534

 

$

 —

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying Notes to Unaudited Consolidated Financial Statements.

5


 

CLOVIS ONCOLOGY, INC.

 

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

 

1. Nature of Business and Basis of Presentation

 

Clovis Oncology, Inc. (together with its consolidated subsidiaries, the “Company”, “Clovis”, “we”, “our”, “us”) is a biopharmaceutical company focused on acquiring, developing and commercializing innovative anti-cancer agents in the United States, Europe and other international markets. We have and intend to continue to license or acquire rights to oncology compounds in all stages of development. In exchange for the right to develop and commercialize these compounds, we generally expect to provide the licensor with a combination of upfront payments, milestone payments and royalties on future sales. In addition, we generally expect to assume the responsibility for future drug development and commercialization costs. We currently operate in one segment. Since inception, our operations have consisted primarily of developing in-licensed compounds, evaluating new product acquisition candidates and general corporate activities.

 

During the second quarter of 2016, we completed the submission of our New Drug Application (“NDA”) with the U.S. Food and Drug Administration (“FDA”) for approval of rucaparib in the U.S. On December 19, 2016, the FDA approved Rubraca® (rucaparib) tablets as monotherapy for the treatment of patients with deleterious BRCA mutation (germline and/or somatic) associated advanced ovarian cancer who have been treated with two or more chemotherapies, and selected for therapy based on an FDA-approved companion diagnostic for Rubraca. We began selling Rubraca in the U.S. in the fourth quarter of 2016. Also in the fourth quarter of 2016, we submitted our rucaparib E.U. regulatory application for a comparable ovarian cancer indication, which was accepted by the European Medicines Agency (“EMA”) during the fourth quarter of 2016.

 

Basis of Presentation

 

All financial information presented includes the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.

 

The unaudited financial statements of Clovis Oncology, Inc. included herein reflect all adjustments, consisting only of normal recurring adjustments that, in the opinion of management, are necessary to fairly state our financial position, results of operations and cash flows for the periods presented herein. Interim results may not be indicative of the results that may be expected for the full year. Certain information and footnote disclosures normally included in audited financial statements prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) have been condensed or omitted pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”). These financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto which are included in our Annual Report on Form 10-K for the year ended December 31, 2016 (“2016 Form 10-K”) for a broader discussion of our business and the opportunities and risks inherent in such business.

 

Use of Estimates

 

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, expenses and revenue and related disclosures. On an ongoing basis, we evaluate our estimates, including estimates related to revenue deductions, intangible asset impairment, clinical trial accruals and share-based compensation expense. We base our estimates on historical experience and other market-specific or other relevant assumptions that we believe to be reasonable under the circumstances. Actual results may differ from those estimates or assumptions.

 

Liquidity

 

We have incurred significant net losses since inception and have relied on our ability to fund our operations through debt and equity financings. We expect operating losses and negative cash flows to continue for the foreseeable future. As we continue to incur losses, transition to profitability is dependent upon achieving a level of revenues from Rubraca adequate to support our cost structure. We may never achieve profitability, and unless or until we do, we will continue to need to raise additional cash.

6


 

 

In January 2017, we sold 5,750,000 shares of our common stock in a public offering at $41.00 per share. The net proceeds from the offering were $221.2 million, after deducting underwriting discounts and commissions and offering expenses. We intend to use the net proceeds of the offering for general corporate purposes, including commercial planning and sales and marketing expenses associated with the launch of Rubraca in the United States and, if approved by the EMA, in Europe, funding of our development programs, selling, general and administrative expenses, acquisition or licensing of additional product candidates or businesses and working capital. Based on current estimates, we believe that our existing cash, cash equivalents and available-for-sale securities will allow us to fund our operating plan through at least the next 12 months.

 

 

2. Summary of Significant Accounting Policies

 

Revenue Recognition

 

Product revenue is derived from sales of our product, Rubraca, in the United States. We distribute our product in the U.S. principally through a limited number of specialty distributor and specialty pharmacy providers, collectively, our customers. Our customers subsequently resell our products to patients and healthcare providers. Separately, we have arrangements with certain payors and other third parties that provide for government-mandated and privately-negotiated rebates, chargebacks and other discounts.

 

Revenues from product sales are recognized when persuasive evidence of an arrangement exists, delivery has occurred and title of the product and associated risk of loss has passed to the customer, the price is fixed or determinable, collection from the customer has been reasonably assured and all performance obligations have been met and returns and allowances can be reasonably estimated. Revenue is recorded net of estimated rebates, chargebacks, discounts and other deductions as well as estimated product returns (collectively, “sales deductions”). We only recognize revenue on product sales once the product is resold to the patient or healthcare provider by the specialty distributor or specialty pharmacy provider, therefore reducing the significance of estimates made for product returns. To date, we have not had any product returns and, we currently do not have an accrual for product returns. We will continue to assess our estimate for product returns as we gain additional historical experience.

 

Cost of Sales – Product

 

Product cost of sales consists primarily of materials, third-party manufacturing costs as well as freight and royalties owed to our licensing partners for Rubraca sales. Based on our policy to expense costs associated with the manufacture of our products prior to regulatory approval, certain of the manufacturing costs of Rubraca units recognized as revenue during the three months ended March 31, 2017 were expensed prior to the December 19, 2016 FDA approval, and therefore are not included in costs of sales during the current period. We expect cost of sales to increase in relation to product revenues as we deplete these inventories and we expect to use the remaining pre-commercialization inventory for product sales through the third quarter of 2017.

 

Cost of Sales – Intangible Asset Amortization

 

Cost of sales for intangible asset amortization consists of the amortization of capitalized milestone payments made to our licensing partners upon FDA approval of Rubraca. Milestone payments are amortized on a straight-line basis over the estimated remaining patent life of Rubraca. 

 

Inventory

 

Inventories are stated at the lower of cost or estimated net realizable value, on a first-in, first-out, or FIFO, basis. We began capitalizing incurred inventory related costs upon the regulatory approval of Rubraca. Prior to the regulatory approval of Rubraca, we incurred costs for the manufacture of the drug that could potentially be available to support the commercial launch of Rubraca and all such costs were recognized as research and development expense. We periodically analyze our inventory levels, and write down inventory that has become obsolete, inventory that has a cost basis in excess of its estimated realizable value and/or inventory in excess of expected sales requirements as cost of product revenues. Expired inventory would be disposed of and the related costs would be written off as cost of product revenues. 

 

7


 

The active pharmaceutical ingredient (“API”) in Rubraca is currently produced by a single supplier. As the API has undergone significant manufacturing specific to its intended purpose at the point it is purchased by us, we classify the API as work-in-process inventory.       

 

Our other significant accounting policies are described in Note 2,  Summary of Significant Accounting Policies of the Notes to the Consolidated Financial Statements included in the Company’s 2016 Form 10-K.

 

From time to time, the Financial Accounting Standards Board (“FASB”) or other standards setting bodies issue new accounting pronouncements.  Updates to the FASB Accounting Standards Codification (“ASC”) are communicated through issuance of an Accounting Standards Update (“ASU”).

 

Recently Adopted Accounting Standards

 

During the first quarter of 2017, we adopted ASU No. 2016-09, “Compensation – Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting”, which is intended to simplify the financial reporting of the income tax impacts of share-based compensation arrangements.  The classification guidance under ASU No. 2016-09 requires the recognition of excess tax benefits from share-based compensation arrangements as a discrete item within income tax benefit rather than additional paid-in capital and the classification guidance requiring presentation of excess tax benefits from share-based compensation arrangements as an operating activity on the statement of cash flows, rather than as a financing activity. 

 

 The adoption of ASU No 2016-09 had no immediate impact on our financial statements and related disclosures because we do not currently recognize a tax benefit related to share-based compensation expense as we maintain net operating loss carryforwards and have established a valuation allowance against the entire net deferred tax asset as of March 31, 2017.  Further, we have elected to continue to estimate the number of stock-based awards expected to vest, as permitted by ASU 2016-09, rather than electing to account for forfeitures as they occur.

 

Also during the first quarter of 2017, we adopted ASU 2015-11, “Simplifying the Measurement of Inventory,” which was issued by the FASB in July 2015. ASU 2015-11 applies a simplified method to value inventory at the lower of cost or net realizable value rather than at the lower of cost or market. The adoption of ASU 2015-11 had no impact on our consolidated financial statements.

 

In January 2017, the FASB issued ASU No. 2017-04, “Simplifying the Test for Goodwill Impairment.” ASU No. 2017-04 removes the requirement to compare the implied fair value of goodwill with its carrying amount as part of step 2 of the goodwill impairment test.  As a result, under the ASU, an entity should perform its annual, or interim, goodwill impairment by comparing the fair value of a reporting unit with its carrying amounts and should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit's fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. As permitted by the ASU, we have early adopted this standard and will apply the new guidance to any interim or annual goodwill impairment testing performed after the date of adoption, March 1, 2017.

 

Recently Issued Accounting Standards

 

In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers” and has subsequently issued several supplemental and/or clarifying ASUs (collectively, “ASC 606”). ASC 606 prescribes a single common revenue standard that replaces most existing U.S. GAAP revenue recognition guidance. ASC 606 is intended to provide a more consistent interpretation and application of the principles outlined in the standard across filers in multiple industries and within the same industries compared to current practices, which should improve comparability.  Adoption of ASC 606 is required for annual and interim periods beginning after December 15, 2017. Upon adoption, we must elect to adopt either retrospectively to each prior reporting period presented or use the modified retrospective transition method with the cumulative effect of initial adoption recognized at the date of initial application. We expect to apply the new standard using the modified retrospective method upon its adoption date on January 1, 2018. 

 

We have begun a comprehensive scoping process to identify and disaggregate all revenue streams that may be impacted by the adoption of ASC 606. To date, we have examined our revenue recognition policy specific to revenue streams from representative contracts governing product sales from Rubraca and have come to preliminary conclusions on the impact of the new standard using the 5-step process prescribed by ASC 606. However, a detailed analysis of

8


 

individual contracts representative of each of the revenue streams planned for the assessment phase of our implementation plan may impact these preliminary conclusions. We are continuing to assess ASC 606’s impact on its financial statements. 

 

In February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842),” which requires lessees to recognize assets and liabilities for the rights and obligations created by most leases on their balance sheet. The guidance is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early application is permitted. ASU 2016-02 requires modified retrospective adoption for all leases existing at, or entered into after, the date of initial application, with an option to use certain transition relief. We are currently evaluating the impact the standard may have on our consolidated financial statements and related disclosures. 

 

3. Financial Instruments and Fair Value Measurements

 

Fair value is defined as the exchange price that would be received to sell an asset or paid to transfer a liability (at exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.

 

The three levels of inputs that may be used to measure fair value include:

 

Level 1:

Quoted prices in active markets for identical assets or liabilities. Our Level 1 assets consist of money market investments. We do not have Level 1 liabilities.

 

 

Level 2:

Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities in active markets or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Our Level 2 assets consist of U.S. treasury securities. We do not have Level 2 liabilities.

 

 

Level 3:

Unobservable inputs that are supported by little or no market activity. We do not have Level 3 assets or liabilities that are measured at fair value on a recurring basis.

 

The following table identifies our assets and liabilities that were measured at fair value on a recurring basis (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

Balance

    

Level 1

    

Level 2

    

Level 3

 

March 31, 2017

 

 

 

 

 

 

 

 

 

 

 

 

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

Money market

 

$

123,166

 

$

123,166

 

$

 —

 

$

 —

 

U.S. treasury securities

 

 

256,278

 

 

 —

 

 

256,278

 

 

 —

 

Total assets at fair value

 

$

379,444

 

$

123,166

 

$

256,278

 

$

 —

 

December 31, 2016

 

 

 

 

 

 

 

 

 

 

 

 

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

Money market

 

$

202,361

 

$

202,361

 

$

 —

 

$

 —

 

U.S. treasury securities

 

 

49,997

 

 

 —

 

 

49,997

 

 

 —

 

Total assets at fair value

 

$

252,358

 

$

202,361

 

$

49,997

 

$

 —

 

 

There were no transfers between the Level 1 and Level 2 categories or into or out of the Level 3 category during the three months ended March 31, 2017.

 

Financial instruments not recorded at fair value include our convertible senior notes. At March 31, 2017, the carrying amount of the convertible senior notes was $281.4 million, which represents the aggregate principal amount net of remaining debt issuance costs, and the fair value was $370.9 million. The fair value was determined using Level 2 inputs based on the indicative pricing published by certain investment banks or trading levels of the Notes, which are not listed on any securities exchange or quoted on an inter-dealer automated quotation system. See Note 9, Convertible Senior Notes for discussion of the convertible senior notes.

 

9


 

4. Available-for-Sale Securities

 

As of March 31, 2017, available-for-sale securities consisted of the following (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

    

 

    

Gross

    

Gross

    

Aggregate

 

 

 

Amortized

 

Unrealized

 

Unrealized

 

Fair

 

 

 

Cost

 

Gains

 

Losses

 

Value

 

U.S. treasury securities

 

$

256,290

 

$

 —

 

$

(12)

 

$

256,278

 

 

As of December 31, 2016, available-for-sale securities consisted of the following (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

    

 

    

Gross

    

Gross

    

Aggregate

 

 

 

Amortized

 

Unrealized

 

Unrealized

 

Fair

 

 

 

Cost

 

Gains

 

Losses

 

Value

 

U.S. treasury securities

 

$

50,004

 

$

 —

 

$

(7)

 

$

49,997

 

 

As of March 31, 2017, the fair value and gross unrealized losses of available-for-sale securities that have been in a continuous unrealized loss position for less than 12 months were as follows (in thousands):

 

 

 

 

 

 

 

 

 

 

    

Aggregate

    

Gross

 

 

 

Fair

 

Unrealized

 

 

 

Value

 

Losses

 

U.S. treasury securities

 

$

256,278

 

$

(12)

 

 

We have concluded that decline in the market value of the available-for-sales securities is temporary.  A decline in the market value of a security below its cost that is deemed to be other than temporary is charged to earnings and results in the establishment of a new cost basis for the security. Factors evaluated to determine if an investment is other-than-temporarily impaired include significant deterioration in earnings performance, credit rating, asset quality or business prospects of the issuer; adverse changes in the general market conditions in which the issuer operates; and our intent and ability to hold the security until an anticipated recovery in value occurs.

 

As of March 31, 2017, the amortized cost and fair value of available-for-sale securities by contractual maturity were (in thousands):

 

 

 

 

 

 

 

 

 

 

    

Amortized

    

Fair

 

 

 

Cost

 

Value

 

Due in one year or less

 

$

256,290

 

$

256,278

 

Due in one year to two years

 

 

 —

 

 

 —

 

Total

 

$

256,290

 

$

256,278

 

 

 

5. Inventories

 

We generally have two categories of inventory: work-in-process and finished goods. As of March 31, 2017, the carrying value of all of our product inventory, which consisted only of the Rubraca API, was categorized as work-in-process. The costs related to our finished goods on-hand as of March 31, 2017 were expensed as incurred prior to the commercialization of Rubraca on December 19, 2016. The carrying value of our inventory as of December 31, 2016 was zero.

 

At March 31, 2017, other assets on the Consolidated Balance Sheets includes a cash deposit of $18.2 million made to a manufacturer for the purchase of inventory which we do not expect to be commercially consumed within the next twelve months.

10


 

6. Other Current Assets

 

Other current assets were comprised of the following (in thousands):

 

 

 

 

 

 

 

 

 

 

 

March 31, 

 

December 31, 

 

 

    

2017

    

2016

 

Receivable from partners

 

$

770

 

$

2,882

 

Prepaid insurance

 

 

878

 

 

1,234

 

Prepaid expenses - other

 

 

2,975

 

 

2,109

 

Receivable - other

 

 

963

 

 

364

 

Other

 

 

59

 

 

90

 

Total

 

$

5,645

 

$

6,679

 

 

 

 

 

 

 

7. Intangible Assets and Goodwill

 

Intangible assets related to capitalized milestones under license agreements consisted of the following (in thousands):

 

 

 

 

 

 

 

 

 

 

 

March 31, 

 

December 31, 

 

 

 

2017

    

2016

 

Intangible asset - milestones

 

$

21,100

 

$

21,100

 

Accumulated amortization

 

 

(425)

 

 

(53)

 

Total intangible asset, net

 

$

20,675

 

$

21,047

 

  

The estimated useful lives of these intangible assets are based on the estimated remaining patent life of Rubraca and extend through 2031.

 

We recorded amortization expense of $0.4 million related to capitalized milestone payments during the three months ended March 31, 2017 included in cost of sales – intangible asset amortization at the Consolidated Statements of Operations and Comprehensive Loss. There was no amortization expense during the three months ended March 31, 2016.

 

Estimated future amortization expense associated with intangibles is expected to be as follows (in thousands):

 

 

 

 

 

 

 

 

 

2017 (remaining)

 

 

 

 

$

1,114

 

2018

 

 

 

 

 

1,486

 

2019

 

 

 

 

 

1,486

 

2020

 

 

 

 

 

1,486

 

2021

 

 

 

 

 

1,486

 

Thereafter

 

 

 

 

 

13,617

 

 

 

 

 

 

$

20,675

 

 

The change in goodwill established as part of the purchase accounting of EOS in November 2013 consisted of the following (in thousands):

 

 

 

 

 

 

Balance at December 31, 2016

 

$

57,192

 

Change in foreign currency gains and losses

 

 

823

 

Balance at March 31, 2017

 

$

58,015

 

 

 

11


 

8. Other Accrued Expenses

 

Other accrued expenses were comprised of the following (in thousands):

 

 

 

 

 

 

 

 

 

 

 

March 31, 

 

December 31, 

 

 

    

2017

    

2016

 

Accrued personnel costs

 

$

5,808

 

$

15,850

 

Accrued interest payable

 

 

299

 

 

2,096

 

Income tax payable

 

 

629

 

 

556

 

Accrued corporate legal fees and professional services

 

 

1,467

 

 

589

 

Accrued expenses - other

 

 

880

 

 

396

 

Total

 

$

9,083

 

$

19,487

 

 

 

9. Convertible Senior Notes

 

On September 9, 2014, we completed a private placement of $287.5 million aggregate principal amount of 2.5% convertible senior notes due 2021 (the “Notes”) resulting in net proceeds of $278.3 million after deducting offering expenses. In accordance with the accounting guidance, the conversion feature did not meet the criteria for bifurcation, and the entire principal amount was recorded as a long-term liability on the Consolidated Balance Sheets.

 

The Notes are governed by the terms of the indenture between the Company, as issuer, and The Bank of New York Mellon Trust Company, N.A., as trustee. The Notes are senior unsecured obligations and bear interest at a rate of 2.5% per year, payable semi-annually in arrears on March 15 and September 15 of each year. The Notes will mature on September 15, 2021, unless earlier converted, redeemed or repurchased.

 

Holders may convert all or any portion of the Notes at any time prior to the close of business on the business day immediately preceding the maturity date. Upon conversion, the holders will receive shares of our common stock at an initial conversion rate of 16.1616 shares per $1,000 in principal amount of Notes, equivalent to a conversion price of approximately $61.88 per share. The conversion rate is subject to adjustment upon the occurrence of certain events described in the indenture, but will not be adjusted for any accrued and unpaid interest. In addition, following certain corporate events that occur prior to the maturity date or upon our issuance of a notice of redemption, we will increase the conversion rate for holders who elect to convert the Notes in connection with such a corporate event or during the related redemption period in certain circumstances.

 

On or after September 15, 2018, we may redeem the Notes, at our option, in whole or in part, if the last reported sale price of our common stock has been at least 150% of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period ending not more than two trading days preceding the date on which we provide written notice of redemption at a redemption price equal to 100% of the principal amount of the Notes to be redeemed plus accrued and unpaid interest to, but excluding, the redemption date. No sinking fund is provided for the Notes.

 

If we undergo a fundamental change, as defined in the indenture, prior to the maturity date of the Notes, holders may require us to repurchase for cash all or any portion of the Notes at a fundamental change repurchase price equal to 100% of the principal amount of the Notes to be repurchased, plus accrued and unpaid interest to, but excluding, the fundamental change repurchase date.

 

The Notes rank senior in right of payment to any of our indebtedness that is expressly subordinated in right of payment to the Notes; equal in right of payment to all of our liabilities that are not so subordinated; effectively junior in right of payment to any secured indebtedness to the extent of the value of the assets securing such indebtedness; and structurally junior to all indebtedness and other liabilities (including trade payables) of our subsidiaries.

 

In connection with the issuance of the Notes, we incurred $9.2 million of debt issuance costs. The debt issuance costs are presented as a deduction from convertible senior notes on the Consolidated Balance Sheets and are amortized as interest expense over the expected life of the Notes using the effective interest method. We determined the expected life of the debt was equal to the seven-year term of the Notes. As of March 31, 2017 and December 31, 2016, the balance of unamortized debt issuance costs was $6.1 million and $6.4 million, respectively.

 

12


 

The following table sets forth total interest expense recognized during the three months ended March 31, 2017 and 2016 (in thousands):

 

 

 

 

 

 

 

 

 

 

 

Three months ended March 31, 

 

 

    

2017

    

2016

 

Contractual interest expense

 

$

1,797

 

$

1,797

 

Accretion of interest on milestone liability

 

 

467

 

 

 —

 

Amortization of debt issuance costs

 

 

317

 

 

307

 

Total interest expense

 

$

2,581

 

$

2,104

 

 

 

10. Stockholders’ Equity

 

Common Stock

 

In January 2017, we sold 5,750,000 shares of our common stock in a public offering at $41.00 per share. The net proceeds from the offering were $221.2 million, after deducting underwriting discounts and commissions and offering expenses.

 

The holders of common stock are entitled to one vote per share on all matters to be voted upon by our stockholders. Subject to the preferences that may be applicable to any outstanding shares of preferred stock, the holders of common stock are entitled to receive ratably such dividends, if any, as may be declared by our Board of Directors.

 

Accumulated Other Comprehensive Loss

 

Accumulated other comprehensive loss consists of changes in foreign currency translation adjustments, which includes changes in a subsidiary’s functional currency, and unrealized gains and losses on available-for-sale securities.

 

The accumulated balances related to each component of other comprehensive income (loss) are summarized as follows (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign Currency

 

Unrealized

 

Total Accumulated

 

 

 

Translation Adjustments

 

(Losses) Gains

 

Other Comprehensive Loss

 

 

 

2017

 

2016

 

2017

 

2016

 

2017

 

2016

 

Balance at December 31, 

 

$

(47,434)

 

$

(47,077)

 

$

(146)

 

$

(383)

 

$

(47,580)

 

$

(47,460)

 

Other comprehensive income (loss)

 

 

735

 

 

5,580

 

 

(5)

 

 

365

 

 

730

 

 

5,945

 

Total before tax

 

 

(46,699)

 

 

(41,497)

 

 

(151)

 

 

(18)

 

 

(46,850)

 

 

(41,515)

 

Tax effect

 

 

(268)

 

 

(2,067)

 

 

 —

 

 

(135)

 

 

(268)

 

 

(2,202)

 

Balance at March 31, 

 

$

(46,967)

 

$

(43,564)

 

$

(151)

 

$

(153)

 

$

(47,118)

 

$

(43,717)

 

 

The period change between December 31, 2016 and March 31, 2017 was primarily due to the currency translation of the goodwill and deferred income taxes associated with the acquisition of EOS in November 2013. There were no reclassifications out of accumulated other comprehensive loss in both the three months ended March 31, 2017 and 2016.

 

11. Share-Based Compensation

 

Share-based compensation expense for all equity based programs, including stock options, restricted stock units and the employee stock purchase plan, for the three months ended March 31, 2017 and 2016 was recognized in the accompanying Consolidated Statements of Operations as follows (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended March 31, 

 

 

 

    

2017

    

2016

 

 

Research and development

 

$

4,167

 

$

7,309

 

 

Selling, general and administrative

 

 

4,780

 

 

3,656

 

 

Total share-based compensation expense

 

$

8,947

 

$

10,965

 

 

 

We did not recognize a tax benefit related to share-based compensation expense during the three months ended March 31, 2017 and 2016, respectively, as we maintain net operating loss carryforwards and have established a valuation allowance against the entire net deferred tax asset as of March 31, 2017.

13


 

 

Stock Options

 

The following table summarizes the activity relating to our options to purchase common stock for the three months ended March 31, 2017:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

 

    

 

 

    

Weighted

    

 

 

 

 

 

 

 

Weighted

 

Average

 

Aggregate

 

 

 

 

 

Average

 

Remaining

 

Intrinsic

 

 

 

Number of

 

Exercise

 

Contractual

 

Value

 

 

 

Options

 

Price

 

Term (Years)

 

(Thousands)

 

Outstanding at December 31, 2016

 

5,520,482

 

$

42.00

 

  

 

 

  

 

Granted

 

446,200

 

 

64.43

 

  

 

 

  

 

Exercised

 

(252,912)

 

 

22.44

 

  

 

 

  

 

Forfeited

 

(128,180)

 

 

38.10

 

  

 

 

  

 

Outstanding at March 31, 2017

 

5,585,590

 

$

44.77

 

7.6

 

$

134,859

 

Vested and expected to vest at March 31, 2017

 

5,212,054

 

$

44.76

 

7.5

 

$

126,378

 

Vested and exercisable at March 31, 2017

 

2,948,774

 

$

44.46

 

6.4

 

$

73,489

 

 

The aggregate intrinsic value in the table above represents the pretax intrinsic value, based on our closing stock price of $63.67 as of March 31, 2017, which would have been received by the option holders had all option holders with in-the-money options exercised their options as of that date.

 

The following table summarizes information about our stock options as of and for the three months ended March 31, 2017 and 2016 (in thousands):

 

 

 

 

 

 

 

 

 

 

 

Three months ended March 31, 

 

 

    

2017

    

2016

 

Weighted-average grant date fair value per share

 

$

47.71

 

$

15.24

 

Intrinsic value of options exercised

 

$

9,525

 

$

46

 

Cash received from stock option exercises

 

$

5,674

 

$

55

 

 

As of March 31, 2017, the unrecognized share-based compensation expense related to unvested options, adjusted for expected forfeitures, was $81.5 million and the estimated weighted-average remaining vesting period was 2.6 years.

 

Restricted Stock

 

During 2016, we issued restricted stock units (“RSUs”) to certain employees under the 2011 Stock Incentive Plan. The RSUs ratably cliff vest one year from the date of grant with the remaining RSUs vesting ratably each subsequent quarter over either a two-year or four-year vesting period, as defined in the grant agreement. Vested RSUs are payable in shares of our common stock at the end of the vesting period. RSUs are measured based on the fair value of the underlying stock on the grant date. The minimum statutory tax on the value of common stock shares issued to employees upon vesting are paid by us through the sale of registered shares of our common stock.

 

The following table summarizes the activity relating to our unvested RSUs for the three months ended March 31, 2017:

 

 

 

 

 

 

 

 

    

 

    

 

 

 

 

 

 

 

Weighted

 

 

 

 

 

Average

 

 

 

Number of

 

Grant Date

 

 

 

Units

 

Fair Value

 

Unvested at December 31, 2016

 

562,458

 

$

24.70

 

Granted

 

210,484

 

 

61.42

 

Vested

 

(42,754)

 

 

19.37

 

Forfeited

 

(20,991)

 

 

20.81

 

Unvested as of March 31, 2017

 

709,197

 

$

36.03

 

Expected to vest after March 31, 2017

 

592,152

 

$

35.53

 

 

14


 

As of March 31, 2017, the unrecognized share-based compensation expense related to unvested RSUs, adjusted for expected forfeitures, was $19.7 million and the estimated weighted-average remaining vesting period was 3.6 years.

 

12. License Agreements

 

In June 2011, we entered into a worldwide license agreement with Pfizer, Inc. to obtain exclusive global rights to develop and commercialize rucaparib, a small molecule inhibitor of poly (ADP-ribose) polymerase (“PARP”), used for the treatment of selected solid tumors. The exclusive rights are exclusive even as to Pfizer and include the right to grant sublicenses. Pursuant to the terms of the license agreement, we made a $7.0 million upfront payment to Pfizer and are required to make additional payments to Pfizer for the achievement of certain development and regulatory and sales milestones and royalties on sales as required by the license agreement.  Prior to the FDA approval of rucaparib, discussed below, we made milestone payments of $1.4 million, which were recognized as acquired in-process research and development expense.

 

On August 30, 2016, we entered into a first amendment to the worldwide license agreement with Pfizer, which amends the June 2011 existing worldwide license agreement to permit us to defer payment of the milestone payments payable upon (i) FDA approval of an NDA for 1st Indication in US and (ii) EMA approval of an MAA for 1st Indication in EU, to a date that is 18 months after the date of achievement of such milestones. In the event that we defer such milestone payments, we have agreed to certain higher payments related to the achievement of such milestones.

 

On December 19, 2016, the FDA approved Rubraca (rucaparib) tablets as monotherapy for the treatment of patients with deleterious BRCA mutation (germline and/or somatic) associated advanced ovarian cancer who have been treated with two or more chemotherapies, and selected for therapy based on an FDA-approved companion diagnostic for Rubraca. The FDA approval resulted in a $0.75 million milestone payment to Pfizer as required by the license agreement, which was made in the first quarter of 2017. The FDA approval also resulted in the obligation to pay a $20.0 million milestone payment, for which we have exercised the option to defer payment by agreeing to pay $23.0 million within 18 months after the date of the FDA approval. These payments were recognized as intangible assets and will be amortized over the estimated remaining useful life of Rubraca.

 

We are obligated under the license agreement to use commercially reasonable efforts to develop and commercialize rucaparib and we are responsible for all remaining development and commercialization costs for rucaparib. We are required to make regulatory milestone payments to Pfizer of up to an additional $69.75 million in aggregate if specified clinical study objectives and regulatory filings, acceptances and approvals are achieved. In addition, we are obligated to make sales milestone payments to Pfizer if specified annual sales targets for rucaparib are met, the majority of which relate to annual sales targets of $500.0 million and above, which, in the aggregate, could amount to total milestone payments of $170.0 million, and tiered royalty payments at a mid-teen percentage rate on our net sales, with standard provisions for royalty offsets to the extent we need to obtain any rights from third parties to commercialize rucaparib.

 

In April 2012, we entered into a license agreement with AstraZeneca UK Limited to acquire exclusive rights associated with rucaparib under a family of patents and patent applications that claim methods of treating patients with PARP inhibitors in certain indications. The license enables the development and commercialization of rucaparib for the uses claimed by these patents.  The FDA approval of rucaparib on December 19, 2016 resulted in a $0.35 million milestone obligation to AstraZeneca as required by the license agreement, which was paid in the first quarter of 2017. This payment was recognized in intangible assets and will be amortized over the estimated remaining useful life of rucaparib. AstraZeneca will also receive royalties on any net sales of rucaparib.

 

We are party to other product license agreements for our other drug candidates, lucitanib and rociletinib (see our 2016 Form 10-K for additional details). We and Les Laboratories Servier (“Servier”) are developing lucitanib pursuant to a global development plan agreed to between the parties. Servier is responsible for all of the global development costs for lucitanib up to €80.0 million. Cumulative global development costs in excess of €80.0 million, if any, will be shared equally between us and Servier. We recorded a $0.8 million and $1.3 million receivable at March 31, 2017 and December 31, 2016, respectively, for the reimbursable development costs incurred under the global development plan, which is included in other current assets on the Consolidated Balance Sheets. For the three months ending March 31, 2017 and 2016, we incurred $0.7 million and $3.6 million, respectively, in research and development costs and recorded reductions in research and development expense of $0.8 million and $3.6 million, respectively, for reimbursable development costs due from Servier.

15


 

 

During the second quarter of 2016, we and Servier agreed to discontinue the development of lucitanib for breast cancer and lung cancer and are continuing to evaluate, what, if any, further development of lucitanib will be pursued. Based on current estimates, we expect to complete the committed on-going development activities in 2017 and expect full reimbursement of our development costs from Servier. Reimbursements are recorded as a reduction to research and development expense on the Consolidated Statements of Operations.

 

13. Net Loss Per Common Share

 

Basic net loss per share is calculated by dividing net loss by the weighted-average number of common shares outstanding during the period. Diluted net loss per share is computed by dividing net loss by the weighted-average number of common share equivalents outstanding using the treasury-stock method for the stock options and RSUs and the if-converted method for the Notes. As a result of our net losses for the periods presented, all potentially dilutive common share equivalents were considered anti-dilutive and were excluded from the computation of diluted net loss per share.

 

The shares outstanding at the end of the respective periods presented in the table below were excluded from the calculation of diluted net loss per share due to their anti-dilutive effect (in thousands):

 

 

 

 

 

 

 

 

 

Three months ended March 31, 

 

 

    

2017

    

2016

 

Common shares under option

 

3,557

 

539

 

Convertible senior notes

 

4,646

 

4,646

 

Total potential dilutive shares

 

8,203

 

5,185

 

 

 

14. Commitments and Contingencies

 

Royalty and License Fee Commitments

 

We have entered into certain license agreements, as identified in Note 12, License Agreements, with third parties that include the payment of development and regulatory milestones, as well as royalty payments, upon the achievement of pre-established development, regulatory and commercial targets. Our payment obligation related to these license agreements is contingent upon the successful development, regulatory approval and commercialization of the licensed products. Due to the nature of these arrangements, the future potential payments are inherently uncertain, and accordingly, we only recognize payment obligations which are probable and estimable as of the balance sheet date. Milestone liabilities of $20.5 million and $20.1 million are recorded on our Consolidated Balance Sheets at March 31, 2017 and December 31, 2016, respectively, and relate to milestone payments for the licensing of our rucaparib product, which was approved by the FDA on December 19, 2016.

 

Manufacture and Services Agreement Commitments

 

On October 3, 2016, we entered into a Manufacturing and Services Agreement (the “Agreement”) with a non-exclusive third-party supplier for the production of the active ingredient for Rubraca. Under the terms of the Agreement, we will provide the third-party supplier a rolling forecast for the supply of the active ingredient in Rubraca that will be updated by us on a quarterly basis. We are obligated to order material sufficient to satisfy an initial quantity specified in any forecast. In addition, the third-party supplier will construct, in its existing facility, a production train that will be exclusively dedicated to the manufacture of the Rubraca active ingredient.  We are obligated to make scheduled capital program fee payments toward capital equipment and other costs associated with the construction of the dedicated production train. Further, once the facility is operational, we are obligated to pay a fixed facility fee each quarter for the duration of the Agreement, which expires on December 31, 2025, unless extended by mutual consent of the parties. As of March 31, 2017, $174.5 million of purchase commitments exist under the Agreement. 

 

Legal Proceedings

 

We and certain of our officers were named as defendants in several lawsuits, as described below. We cannot reasonably predict the outcome of these legal proceedings, nor can we estimate the amount of loss or range of loss, if any, that may result. An adverse outcome in these proceedings could have a material adverse effect on our results of operations, cash flows or financial condition.

16


 

 

On November 19, 2015, Steve Kimbro, a purported shareholder of Clovis, filed a purported class action complaint (the “Kimbro Complaint”) against Clovis and certain of its officers in the United States District Court for the District of Colorado. The Kimbro Complaint purports to be asserted on behalf of a class of persons who purchased Clovis stock between October 31, 2013 and November 15, 2015. The Kimbro Complaint generally alleges that Clovis and certain of its officers violated federal securities laws by making allegedly false and misleading statements regarding the progress toward FDA approval and the potential for market success of rociletinib. The Kimbro Complaint seeks unspecified damages.

 

Also on November 19, 2015, a second purported shareholder class action complaint was filed by Sonny P. Medina, another purported Clovis shareholder, containing similar allegations to those set forth in the Kimbro Complaint, also in the United States District Court for the District of Colorado (the “Medina Complaint”). The Medina Complaint purports to be asserted on behalf of a class of persons who purchased Clovis stock between May 20, 2014 and November 13, 2015. On November 20, 2015, a third complaint was filed by John Moran in the United States District Court for the Northern District of California (the “Moran Complaint”). The Moran Complaint contains similar allegations to those asserted in the Kimbro and Medina Complaints and purports to be asserted on behalf of a plaintiff class who purchased Clovis stock between October 31, 2013 and November 13, 2015.

 

On December 14, 2015, Ralph P. Rocco, a fourth purported shareholder of Clovis, filed a complaint in the United States District Court for the District of Colorado (the “Rocco Complaint”). The Rocco Complaint contains similar allegations to those set forth in the previous complaints and purports to be asserted on behalf of a plaintiff class who purchased Clovis stock between October 31, 2013 and November 15, 2015.

 

On January 19, 2016, a number of motions were filed in both the District of Colorado and the Northern District of California seeking to consolidate the shareholder class actions into one matter and for appointment of a lead plaintiff. All lead plaintiff movants other than M. Arkin (1999) LTD and Arkin Communications LTD (the “Arkin Plaintiffs”) subsequently filed notices of non-opposition to the Arkin Plaintiffs’ application.

 

On February 2, 2016, the Arkin Plaintiffs filed a motion to transfer the Moran Complaint to the District of Colorado (the “Motion to Transfer”). Also on February 2, 2016, the defendants filed a statement in the Northern District of California supporting the consolidation of all actions in a single court, the District of Colorado. On February 3, 2016, the Northern District of California court denied without prejudice the lead plaintiff motions filed in that court pending a decision on the Motion to Transfer.

 

On February 16, 2016, the defendants filed a memorandum in support of the Motion to Transfer, and plaintiff Moran filed a notice of non-opposition to the Motion to Transfer. On February 17, 2016, the Northern District of California court granted the Motion to Transfer.

 

On February 18, 2016, the Medina court issued an opinion and order addressing the various motions for consolidation and appointment of lead plaintiff and lead counsel in the District of Colorado actions. By this ruling, the court consolidated the Medina, Kimbro and Rocco actions into a single proceeding. The court also appointed the Arkin Plaintiffs as the lead plaintiffs and Bernstein Litowitz Berger & Grossman as lead counsel for the putative class.

 

On April 1, 2016, the Arkin Plaintiffs and the defendants filed a stipulated motion to set the schedule for the filing of a consolidated complaint in the Medina, Kimbro and Rocco actions (the “Consolidated Complaint”) and the responses thereto, including the defendants’ motion to dismiss the Consolidated Complaint (the “Motion to Dismiss”), and to stay discovery and related proceedings until the District of Colorado issues a decision on the Motion to Dismiss. The stipulated motion was entered by the District of Colorado on April 4, 2016.

 

Subject to further agreed-upon extensions by the parties, the Arkin Plaintiffs filed a Consolidated Complaint on May 6, 2016. The Consolidated Complaint names as defendants the Company and certain of its current and former officers (the “Clovis Defendants”), certain underwriters (the “Underwriter Defendants”) for a Company follow-on offering conducted in July 2015 (the “July 2015 Offering”) and certain Company venture capital investors (the “Venture Capital Defendants”). The Consolidated Complaint alleges that defendants violated particular sections of the Securities Exchange Act of 1934 (the “Exchange Act”) and the Securities Act of 1933 (the “Securities Act”). The purported misrepresentations and omissions concern allegedly misleading statements about rociletinib. The consolidated action is purportedly brought on behalf of investors who purchased the Company’s securities between May 31, 2014 and April 7,

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2016 (with respect to the Exchange Act claims) and investors who purchased the Company’s securities pursuant or traceable to the July 2015 Offering (with respect to the Securities Act claims). The Consolidated Complaint seeks unspecified compensatory and recessionary damages.

 

On May 23, 2016, the Medina, Kimbro, Rocco, and Moran actions were consolidated for all purposes in a single proceeding in the District of Colorado.

 

The Clovis Defendants, the Underwriter Defendants and the Venture Capital Defendants filed a Motion to Dismiss on July 27, 2016, the Arkin Plaintiffs filed their opposition on September 23, 2016, and the defendants filed their replies on October 14, 2016.

 

On February 9, 2017, Judge Raymond P. Moore of the District of Colorado issued an Opinion and Order granting in part and denying in part the Clovis Defendants’ Motion to Dismiss. The Clovis Defendants’ Motion to Dismiss was granted with prejudice with respect to named defendant Gillian Ivers-Read and granted with respect to certain statements determined by the Court to be nonactionable statements of opinion or optimism. The Clovis Defendants’ Motion to Dismiss was otherwise denied. Next, the Court granted in part and denied in part the Underwriter Defendants’ Motion to Dismiss. The Underwriter Defendants’ Motion to Dismiss was granted without prejudice with respect to Plaintiffs’ claim under Section 12(a) of the Securities Act and granted insofar as the Court determined that certain statements challenged under Section 11 of the Securities Act are nonactionable statements of opinion or optimism. The Opinion and Order provided that Plaintiffs shall have until February 23, 2017 to file an amended pleading directed solely as to their Section 12(a) claim against the Underwriter Defendants. The Underwriters Defendants’ Motion to dismiss was otherwise denied.  Finally, the court granted the Venture Capital Defendants’ Motion to Dismiss with prejudice.

 

On April 11, 2017, the Court entered a scheduling order providing for, inter alia, a schedule for completing document and fact discovery, as well as setting briefing schedules for motions for class certification and motions for summary judgment. 

 

On March 14, 2017, the Clovis Defendants and the Arkin Plaintiffs participated in a mediation, which did not result in a settlement. We intend to vigorously defend the lawsuit, but there can be no assurance that the defense will be successful.

 

On January 22, 2016, the Electrical Workers Local #357 Pension and Health & Welfare Trusts, a purported shareholder of Clovis, filed a purported class action complaint (the “Electrical Workers Complaint”) against Clovis and certain of its officers, directors, investors and underwriters in the Superior Court of the State of California, County of San Mateo. The Electrical Workers Complaint purports to be asserted on behalf of a class of persons who purchased stock in Clovis’ July 8, 2015 follow-on offering. The Electrical Workers Complaint generally alleges that the defendants violated the Securities Act because the offering documents for the July 8, 2015 follow-on offering contained allegedly false and misleading statements regarding the progress toward FDA approval and the potential for market success of rociletinib. The Electrical Workers Complaint seeks unspecified damages.

 

On February 25, 2016, the defendants removed the case to the United States District Court for the Northern District of California and thereafter moved to transfer the case to the District of Colorado (“Motion to Transfer”). On March 2, 2016, the plaintiff filed a motion to remand the case to San Mateo County Superior Court (“Motion to Remand”). Following briefing on the Motion to Transfer and the Motion to Remand, the Northern District of California held a hearing on April 18, 2016 concerning the Motion to Remand, at the conclusion of which the court granted to the Motion to Remand. On May 5, 2016, the Northern District of California issued a written decision and order granting the Motion to Remand the case to the Superior Court, County of San Mateo and denying the Motion to Transfer as moot.

 

While the case was pending in the United States District Court for the Northern District of California, the parties entered into a stipulation extending the defendants’ time to respond to the Electrical Workers Complaint for 30 days following the filing of an amended complaint by plaintiff or the designation by plaintiff of the Electrical Workers Complaint as the operative complaint.  Following remand, Superior Court of the State of California, County of San Mateo so-ordered the stipulation on June 22, 2016.

 

On June 30, 2016, the Electrical Workers Plaintiffs filed an amended Complaint (the “Amended Complaint”). The Amended Complaint names as defendants the Company and certain of its current and former officers and directors, certain underwriters for the July 2015 Offering and certain Company venture capital investors. The Amended Complaint

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purports to assert claims under the Securities Act based upon alleged misstatements in Clovis’ offering documents for the July 2015 Offering. The Amended Complaint includes new allegations about the Company’s rociletinib disclosures.  The Amended Complaint seeks unspecified damages. 

 

Pursuant to a briefing schedule ordered by the court on July 28, 2016, defendants filed a motion to stay the Electrical Workers action pending resolution of the Medina, Kimbro, Moran, and Rocco actions in the District of Colorado (“Motion to Stay”), and a demurrer to the Amended Complaint, on August 15, 2016; plaintiffs filed their oppositions on August 31, 2016; and the defendants filed their reply briefs on September 15, 2016.  On September 23, 2016, after hearing oral argument, the San Mateo Superior Court granted defendants’ motion to stay proceedings pending resolution of the related securities class action captioned Medina v. Clovis Oncology, Inc., et. al., No. 1:15-cv-2546 (the “Colorado Action”).  Per the order to stay proceedings, the San Mateo Superior Court will defer issuing a ruling on defendants’ pending demurrer, and the parties’ first status report as to the progress of the Colorado Action was filed with the San Mateo Superior Court on March 23, 2017. The parties’ second status report as to the progress of the Colorado Action is due on September 21, 2017.

 

The Company intends to vigorously defend against the allegations contained in the Electrical Workers Amended Complaint, but there can be no assurance that the defense will be successful.

 

On November 10, 2016, Antipodean Domestic Partners (“Antipodean”) filed a complaint (the “Antipodean Complaint”) against Clovis and certain of its officers, directors and underwriters in New York Supreme Court, County of New York. The Antipodean Complaint alleges that the defendants violated certain sections of the Securities Act by making allegedly false statements to Antipodean and in the Offering Materials for the Secondary Offering relating to the efficacy of rociletinib, its safety profile, and its prospects for market success. In addition to the Securities Act claims, the Antipodean Complaint also asserts Colorado state law claims, and common law claims. Both the state law and common law claims are based on the allegedly false and misleading statements regarding rociletinib’s progress toward FDA approval. The Antipodean Complaint seeks compensatory, recessionary, and punitive damages.

 

On December 15, 2016, the Antipodean Plaintiffs filed an amended complaint (“the Amended Complaint”) asserting substantially the same claims against the same defendants. The Amended Complaint purports to correct certain details in the original Complaint.

 

On January 21, 2017, the parties entered into a stipulation extending the defendants’ time to respond to the Antipodean Amended Complaint until March 29, 2017, subject to the terms and conditions stated therein. Pursuant to the January 21, 2017 stipulation, the defendants filed a motion to stay the Antipodean action pending resolution of the Medina, Kimbro, Moran, and Rocco actions in the District of Colorado (“Motion to Stay”) on January 31, 2017; the plaintiff filed their opposition on March 17, 2017; and the defendants filed their reply brief on March 23, 2017. Also pursuant to the January 21, 2017 stipulation, the defendants filed a motion to dismiss the Antipodean Amended Complaint (“Motion to Dismiss”) on March 29, 2017. Pursuant to a briefing schedule ordered by the court on April 17, 2017, the plaintiff’s opposition briefs are due on April 27, 2017 and the defendants’ reply briefs are due on May 11, 2017. Pursuant to the April 17, 2017 order, the Motion to Stay and Motion to Dismiss will be decided by the Court together.    

 

On March 14, 2017, the Clovis Defendants and Antipodean participated in a mediation, which did not result in a settlement. We intend to vigorously defend against the allegations in the Antipodean Amended Complaint.  However, there can be no assurance that the defense will be successful.

 

We received a letter dated May 31, 2016 from an alleged owner of our common stock, which purports to set forth a demand for inspection of certain of our books and records pursuant to 8 Del. C. § 220 (the “Macalinao Demand Letter”). The Macalinao Demand Letter was purportedly made for the purposes of investigating alleged misconduct at the Company relating to rociletinib. On June 24, 2016, we submitted a response to the Macalinao Demand Letter. We believe that the allegations in the Macalinao Demand Letter are unfounded, but there can be no assurance about the likelihood of an adverse outcome. In January 2017, the Company produced certain books and records in response to the Macalinao Demand Letter.

 

On March 31, 2017, the purported shareholder filed under seal a shareholder derivative complaint (the “Macalinao Complaint”) against certain directors and an officer of the Company in the Court of Chancery of the State of Delaware.  On April 5, 2017, a public version of the Macalinao Complaint was filed.  The Macalinao Complaint purports to rely on

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documents produced in response to the Macalinao Demand Letter.  The Macalinao Complaint generally alleges that the defendants breached their fiduciary duties owed to the Company by allegedly causing or allowing misrepresentations of the Company’s business operations and prospects.  The Macalinao Complaint also alleges claims for unjust enrichment.  Finally, the Macalinao Complaint also alleges that certain director defendants engaged in insider trading.  The Macalinao Complaint seeks, among other things, an award of money damages.

 

The Company intends to vigorously defend against the allegations contained in the Macalinao Complaint, but there can be no assurance that the defense will be successful.

 

We received a letter dated December 15, 2016 from a second alleged owner of our common stock, which purports to set forth a demand for inspection of the Company’s books and records pursuant to 8 Del. C. § 220 (the “McKenry Demand Letter”). The McKenry Demand Letter was purportedly made for the purposes of investigating alleged misconduct at the Company relating to rociletinib. On January 4, 2017, we submitted a response to the McKenry Demand Letter. The Company believes that the allegations in the McKenry Demand Letter are unfounded, but there can be no assurance about the likelihood of an adverse outcome. In February 2017, the Company produced certain books and records in response to the McKenry Demand Letter.

 

On March 23, 2017, the second purported shareholder filed under seal a shareholder derivative complaint (the “McKenry Complaint”) against certain directors and an officer of the Company in the Court of Chancery of the State of Delaware. On March 27, 2017, a public version of the McKenry Complaint was filed. The McKenry Complaint purports to rely on documents produced in response to the McKenry Demand Letter. The McKenry Complaint generally alleges that the defendants breached their fiduciary duties owed to the Company by failing to properly ensure that the TIGER-X clinical trial was being conducted in accordance with applicable rules, regulations and protocol, and by allowing Clovis representatives to make materially misleading statements about the success of rociletinib. The McKenry Complaint seeks, among other things, an award of money damages.

 

The Company intends to vigorously defend against the allegations contained in the McKenry Complaint, but there can be no assurance that the defense will be successful.

 

On March 20, 2017, a purported shareholder of the Company, filed a shareholder derivative complaint (the “Guo Complaint”) against certain officers and directors of the Company in the United States District Court for the District of Colorado. The Guo Complaint generally alleges that the defendants breached their fiduciary duties owed to the Company by either recklessly or with gross negligence approving or permitting misrepresentations of the Company’s business operations and prospects. The Guo Complaint also alleges claims for waste of corporate assets and unjust enrichment.  Finally, the Guo Complaint also alleges that certain of the individual defendants violated Section 14(a) of the Securities Exchange Act, by allegedly negligently issuing, causing to be issued, and participating in the issuance of materially misleading statements to stockholders which were contained in the Company’s Proxy Statement on Schedule DEF 14A in connection with the 2015 Annual Meeting of Stockholders, held on June 11, 2015. The Guo Complaint seeks, among other things, an award of money damages.

 

The Company intends to vigorously defend against the allegations contained in the Guo Complaint, but there can be no assurance that the defense will be successful.

 

We have received requests for information from governmental agencies relating to our regulatory update announcement in November 2015 that the FDA requested additional clinical data on the efficacy and safety of rociletinib. We are cooperating with the inquiries.

 

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ITEM 2.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

Forward-Looking Information

 

This Quarterly Report on Form 10-Q and the information incorporated herein by reference includes statements that are, or may be deemed, “forward-looking statements.” In some cases, these forward-looking statements can be identified by the use of forward-looking terminology, including the terms “believes,” “estimates,” “anticipates,” “expects,” “plans,” “intends,” “may,” “could,” “might,” “will,” “should,” “approximately” or, in each case, their negative or other variations thereon or comparable terminology, although not all forward-looking statements contain these words. They appear in a number of places throughout this Quarterly Report on Form 10-Q and include statements regarding our intentions, beliefs, projections, outlook, analyses or current expectations concerning, among other things, our ongoing and planned non-clinical studies and clinical trials, the timing of and our ability to make regulatory filings and obtain and maintain regulatory approvals for our product candidates, the degree of clinical utility of our products, particularly in specific patient populations, expectations regarding clinical trial data, our results of operations, financial condition, liquidity, prospects, growth and strategies, the industry in which we operate and the trends that may affect the industry or us.

 

By their nature, forward-looking statements involve risks and uncertainties because they relate to events, competitive dynamics and industry change and depend on the economic circumstances that may or may not occur in the future or may occur on longer or shorter timelines than anticipated. We caution you that forward-looking statements are not guarantees of future performance and that our actual results of operations, financial condition and liquidity and the development of the industry in which we operate may differ materially from the forward-looking statements contained herein.

 

Any forward-looking statements that we make in this Quarterly Report on Form 10-Q speak only as of the date of such statement, and we undertake no obligation to update such statements to reflect events or circumstances after the date of this Quarterly Report on Form 10-Q or to reflect the occurrence of unanticipated events.

 

You should also read carefully the factors described in the “Risk Factors” in  Part I, Item 1A in our most recent Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission (“SEC”), as updated from time to time in our subsequent SEC filings, to better understand the risks and uncertainties inherent in our business and underlying any forward-looking statements.

 

Overview

 

We are a biopharmaceutical company focused on acquiring, developing and commercializing innovative anti-cancer agents in the United States, Europe and additional international markets. We target our development programs for the treatment of specific subsets of cancer populations, and simultaneously develop, with partners, diagnostic tools intended to direct a compound in development to the population that is most likely to benefit from its use.

 

Our commercial product Rubraca® (rucaparib) is the first and only oral, small molecule poly ADP-ribose polymerase, or PARP, inhibitor of PARP1, PARP2 and PARP3 approved in the United States by the FDA as monotherapy for the treatment of patients with deleterious BRCA (human genes associated with the repair of damaged DNA) mutation (germline and/or somatic) associated advanced ovarian cancer who have been treated with two or more chemotherapies, and selected for therapy based on an FDA-approved companion diagnostic for Rubraca.

 

The Marketing Authorization Application, or MAA, submission with the European Medicines Agency (“EMA”) for a comparable ovarian cancer indication was accepted by the EMA during the fourth quarter of 2016. Additionally, rucaparib is being studied as a potential maintenance therapy for ovarian cancer patients in the ARIEL3 trial. Data from ARIEL3 is anticipated in mid-2017. Pending positive data from ARIEL3, we intend to follow up with a supplemental NDA for second-line maintenance therapy in women with ovarian cancer who have responded to platinum-based therapy.  Rucaparib is also being developed in patients with mutant BRCA tumors and other DNA repair deficiencies beyond BRCA – commonly referred to as homologous recombination deficiencies.  Studies open for enrollment or under consideration include prostate, breast, pancreatic, gastroesophageal, bladder and lung cancers. We hold worldwide rights for rucaparib.

 

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In addition, we have two other product candidates: lucitanib, an oral inhibitor of the tyrosine kinase activity of vascular endothelial growth factor receptors (VEGFR) 1-3, platelet-derived growth factor receptors (PDGFR) alpha and beta and fibroblast growth factor receptors (FGFR) 1-3, and rociletinib, an oral mutant-selective inhibitor of epidermal growth factor receptor (EGFR). While we have stopped enrollment in ongoing trials for each of these candidates, we continue to provide drugs to patients whose clinicians recommend continuing therapy. We maintain certain development and commercialization rights for lucitanib and global development and commercialization rights for rociletinib.

 

We commenced operations in April 2009. To date, we have devoted substantially all of our resources to identifying and in-licensing product candidates, performing development activities with respect to those product candidates and the general and administrative support of these operations. Through March 31, 2017, we have generated $13.6 million in license and milestone revenue related to our collaboration and license agreement with Servier and have generated $7.1 million net product revenue related to sales of Rubraca, which we began to commercialize on December 19, 2016. We have principally funded our operations using the net proceeds from the sale of convertible preferred stock, the issuance of convertible promissory notes, public offerings of our common stock and our convertible senior notes offering.

 

We have never been profitable and, as of March 31, 2017, we had an accumulated deficit of $1,189.5 million. We incurred net losses of $58.5 million and $83.4 million for the three months ended March 31, 2017 and 2016, respectively, and had cash, cash equivalents and available-for-sale securities totaling $408.8 million at March 31, 2017.

 

We expect to incur significant losses for the foreseeable future, as we incur costs related to commercial activities associated with Rubraca. In January 2017, we sold 5,750,000 shares of our common stock in a public offering at $41.00 per share. The net proceeds from the offering were $221.2 million, after deducting underwriting discounts and commissions and offering expenses. We intend to use the net proceeds of the offering for general corporate purposes, including commercial planning and sales and marketing expenses associated with the launch of Rubraca in the United States and, if approved by the EMA, in Europe, funding of our development programs, selling, general and administrative expenses, acquisition or licensing of additional product candidates or businesses and working capital. Based on our current estimates, we believe that our cash, cash equivalents and available-for-sale securities will allow us to fund activities through at least the next 12 months. Until we can generate a sufficient amount of revenue from Rubraca, we expect to finance our operations in part through additional public or private equity or debt offerings and may seek additional capital through arrangements with strategic partners or from other sources.  Adequate additional financing may not be available to us on acceptable terms, or at all. Our failure to raise capital as and when needed would have a negative impact on our financial condition and our ability to pursue our business strategy. We will need to generate significant revenues to achieve profitability, and we may never do so.

 

Product License Agreements

 

In June 2011, we entered into a worldwide license agreement with Pfizer, Inc. to obtain exclusive global rights to develop and commercialize rucaparib, a small molecule inhibitor of poly (ADP-ribose) polymerase (“PARP”), used for the treatment of selected solid tumors. The exclusive rights are exclusive even as to Pfizer and include the right to grant sublicenses. Pursuant to the terms of the license agreement, we made a $7.0 million upfront payment to Pfizer and are required to make additional payments to Pfizer for the achievement of certain development and regulatory and sales milestones and royalties on sales as required by the license agreement. Prior to the FDA approval of rucaparib, discussed below, we made milestone payments of $1.4 million, which were recognized as acquired in-process research and development expense.

 

On August 30, 2016, we entered into a first amendment to the worldwide license agreement with Pfizer, which amends the June 2011 existing worldwide license agreement to permit us to defer payment of the milestone payments payable upon (i) FDA approval of an NDA for 1st Indication in US and (ii) EMA approval of an MAA for 1st Indication in EU, to a date that is 18 months after the date of achievement of such milestones. In the event that we defer such milestone payments, we have agreed to certain higher payments related to the achievement of such milestones.

 

On December 19, 2016, the FDA approved Rubraca (rucaparib) tablets as monotherapy for the treatment of patients with deleterious BRCA mutation (germline and/or somatic) associated advanced ovarian cancer who have been treated with two or more chemotherapies, and selected for therapy based on an FDA-approved companion diagnostic for Rubraca. The FDA approval resulted in a $0.75 million milestone payment to Pfizer as required by the license agreement, which was made in the first quarter of 2017. The FDA approval also resulted in the obligation to pay a $20.0 

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million milestone payment, for which we have exercised the option to defer payment by agreeing to pay $23.0 million within 18 months after the date of the FDA approval. These payments were recognized as intangible assets and will be amortized over the estimated remaining useful life of Rubraca.

 

We are obligated under the license agreement to use commercially reasonable efforts to develop and commercialize rucaparib and we are responsible for all remaining development and commercialization costs for rucaparib. We are required to make regulatory milestone payments to Pfizer of up to an additional $69.75 million in aggregate if specified clinical study objectives and regulatory filings, acceptances and approvals are achieved. In addition, we are obligated to make sales milestone payments to Pfizer if specified annual sales targets for rucaparib are met, the majority of which relate to annual sales targets of $500.0 million and above, which, in the aggregate, could amount to total milestone payments of $170.0 million, and tiered royalty payments at a mid-teen percentage rate on our net sales, with standard provisions for royalty offsets to the extent we need to obtain any rights from third parties to commercialize rucaparib.

 

In April 2012, we entered into a license agreement with AstraZeneca UK Limited to acquire exclusive rights associated with rucaparib under a family of patents and patent applications that claim methods of treating patients with PARP inhibitors in certain indications. The license enables the development and commercialization of rucaparib for the uses claimed by these patents. The FDA approval of rucaparib on December 19, 2016 resulted in a $0.35 million milestone obligation to AstraZeneca as required by the license agreement, which was paid in the first quarter of 2017. This payment was recognized in intangible assets and will be amortized over the estimated remaining useful life of rucaparib. AstraZeneca will also receive royalties on any net sales of rucaparib.

 

We are party to other product license agreements for our other drug candidates, lucitanib and rociletinib (see our 2016 Form 10-K for additional details).

 

Financial Operations Overview

 

Revenue

 

Product revenue is derived from sales of our product, Rubraca, in the United States. We distribute our product in the U.S. principally through a limited number of specialty distributor and specialty pharmacy providers, collectively, our customers. Our customers subsequently resell our products to patients and healthcare providers. Separately, we have arrangements with certain payors and other third parties that provide for government-mandated and privately-negotiated rebates, chargebacks and other discounts. Revenue is recorded net of estimated rebates, chargebacks, discounts and other deductions as well as estimated product returns (collectively, “sales deductions”). We only recognize revenue on product sales once the product is resold to the patient or healthcare provider by the specialty distributor or specialty pharmacy provider, therefore reducing the significance of estimates made for product returns. 

 

Sales Deductions

 

Estimating sales deductions requires significant judgments about future events and uncertainties, and requires us to rely heavily on assumptions, as well as historical experience. Estimated sales deductions are provided for the following:

 

·

Rebates. Rebates include mandated discounts under the Medicaid Drug Rebate Program and the Medicare coverage gap program. Rebates are amounts owed after the final dispensing of products to a benefit plan participant and are based upon contractual agreements or legal requirements with the public sector benefit providers. The accrual for rebates is based on statutory discount rates and known sales to specialty pharmacy patients, or expected utilization for specialty distributor sales to healthcare providers. As we gain more historical experience, the accrual will be based solely on the expected utilization from historical data we have accumulated since Rubraca product launch. Rebates are generally invoiced and paid quarterly in arrears so that the accrual balance consists of an estimate of the amount expected to be incurred for the current quarter’s activity, plus an accrual balance for known or estimated prior quarters’ unpaid rebates. If actual future rebates vary from estimates, we may need to adjust balances of such rebates to reflect our actual expenditures with respect to these programs, which would affect revenue in the period of adjustment.

 

·

Chargebacks. Chargebacks are discounts that occur when contracted customers, which currently consist primarily of group purchasing organizations, Public Health Service organizations and federal government

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entities purchasing via the Federal Supply Schedule, purchase directly from our specialty distributors at a discounted price. The specialty distributor, in turn, charges back the difference between the price initially paid by the specialty distributor and the discounted price paid to the specialty distributor by the healthcare provider. The accrual for specialty distributor chargebacks is estimated based on known chargeback rates and known sales to specialty distributors adjusted for the estimated utilization by healthcare providers.

 

·

Discounts. Specialty distributors and specialty pharmacies are offered various forms of consideration, including service fees and prompt pay discounts for payment within a specified period. We expect these customers will earn prompt pay discounts and therefore, we deduct the full amount of these discounts from product sales when revenue are recognized. Service fees are recorded as a selling expense when product sales occur.

 

·

Co-pay assistance. Patients who have commercial insurance and meet certain eligibility requirements may receive co-pay assistance. The intent of this program is to reduce the patient’s out of pocket costs. Liabilities for co-pay assistance are based on actual program participation and estimates of program redemption using data provided by third-party administrators.

 

·

Returns. Sales of our products are not subject to a general right of return at the point we recognize revenue, which is the point the product is sold to the patient or healthcare provider. To date, we have not had any product returns and, we currently do not have an accrual for product returns. We will continue to assess our estimate for product returns as we gain additional historical experience.

 

In the three months ended March 31, 2017, we recorded net product revenue of $7.0 million related to sales of Rubraca, which we began to commercialize on December 19, 2016. Our ability to generate revenue and become profitable depends upon our ability to successfully commercialize products. Any inability on our part to successfully commercialize Rubraca in the United States and any foreign territories where it may be approved, or any significant delay in such approvals, could have a material adverse impact on our ability to execute upon our business strategy and, ultimately, to generate sufficient revenues from Rubraca to reach or maintain profitability or sustain our anticipated levels of operations.

 

Cost of Sales – Product

 

We recorded product cost of sales from sales of Rubraca in the three months ended March 31, 2017.  Product cost of sales consists primarily of materials, third-party manufacturing costs as well as freight and royalties owed to our licensing partners for Rubraca sales. Based on our policy to expense costs associated with the manufacture of our products prior to regulatory approval, certain of the manufacturing costs of Rubraca units recognized as revenue during the three months ended March 31, 2017 were expensed prior to the December 19, 2016 FDA approval, and therefore are not included in costs of sales during the current period. We expect cost of sales to increase in relation to product revenues as we deplete these inventories and we expect to use the remaining pre-commercialization inventory for product sales through the third quarter of 2017.

 

Cost of Sales – Intangible Asset Amortization

 

Cost of sales for intangible asset amortization consists of the amortization of capitalized milestone payments made to our licensing partners upon FDA approval of Rubraca. Milestone payments are amortized on a straight-line basis over the estimated remaining patent life of Rubraca.     

 

Research and Development Expenses

 

Research and development expenses consist of costs incurred for the development of our product candidates and companion diagnostics, which include:

·

license fees and milestone payments related to the acquisition of in-licensed products, which are reported on our Consolidated Statements of Operations as acquired in-process research and development;

·

employee-related expenses, including salaries, benefits, travel and share-based compensation expense;

·

expenses incurred under agreements with contract research organizations and investigative sites that conduct our clinical trials;

·

the cost of acquiring, developing and manufacturing clinical trial materials;

·

costs associated with non-clinical activities and regulatory operations;

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·

market research, disease education and other commercial product planning activities, including the hiring of a U.S. sales and marketing and medical affairs organization in preparation for the commercial launch of rucaparib; and

·

activities associated with the development of companion diagnostics for our product candidates.

 

Research and development costs are expensed as incurred. License fees and milestone payments related to in-licensed products and technology are expensed if it is determined that they have no alternative future use. Costs for certain development activities, such as clinical trials and manufacturing of clinical supply, are recognized based on an evaluation of the progress to completion of specific tasks using data such as patient enrollment, clinical site activations or information provided to us by our vendors. As a result of the FDA approval of Rubraca and the discontinuation of enrollment in rociletinib, our research and development expenses decreased in the three months ended March 31, 2017 compared to the prior year period and are expected to decrease for the remainder of 2017 compared to prior year as we continue to commercialize Rubraca and commercialization related expenses are classified as selling, general and administrative expenses and not research and development costs.

 

The following table identifies research and development and acquired in-process research and development costs on a program-specific basis for our products under development. Personnel-related costs, depreciation and share-based compensation are not allocated to specific programs, as they are deployed across multiple projects under development and, as such, are separately classified as personnel and other expenses in the table below (in thousands):

 

 

 

 

 

 

 

 

 

 

 

Three months ended March 31, 

 

 

    

2017

    

2016

 

 

 

 

 

 

 

 

 

Rucaparib Expenses

 

 

 

 

 

 

 

Research and development

 

$

14,511

 

$

24,557

 

Rucaparib Total

 

 

14,511

 

 

24,557

 

Lucitanib Expenses

 

 

 

 

 

 

 

Research and development (a)

 

 

(87)

 

 

(20)

 

Lucitanib Total

 

 

(87)

 

 

(20)

 

Rociletinib Expenses

 

 

 

 

 

 

 

Research and development

 

 

3,190

 

 

20,594

 

Rociletinib Total

 

 

3,190

 

 

20,594

 

Personnel and other expenses

 

 

14,833

 

 

29,477

 

Total

 

$

32,447

 

$

74,608

 

 

(a)This amount reflects actual costs incurred less amounts due from Servier for reimbursable development expenses pursuant to the collaboration and license agreement described in Note 12, License Agreements to our unaudited consolidated financial statements included in this Quarterly Report on Form 10-Q.

 

Selling, General and Administrative Expenses

 

Selling, general and administrative expenses consist principally of salaries and related costs for personnel in executive, commercial, finance, legal, investor relations, human resources, and information technology functions. Other selling, general and administrative expenses include facilities expenses, communication expenses, information technology costs, corporate insurance and professional fees for legal, consulting and accounting services. With the FDA approval of Rubraca on December 19, 2016, all sales and marketing expenses associated with Rubraca are included in selling, general and administrative expenses. We anticipate that our selling, general and administrative expenses will continue to increase in the future in support of our commercial activities related to Rubraca.

 

Acquired In-Process Research and Development Expenses

 

Acquired in-process research and development expenses consist of upfront payments to acquire a new drug compound, as well as subsequent milestone payments. Acquired in-process research and development payments are immediately expensed provided that the drug has not achieved regulatory approval for marketing and, absent obtaining such approval, has no alternative future use. Once regulatory approval is received, payments to acquire rights, and the related milestone payments, are capitalized and the amortization of such assets recorded to intangible asset amortization cost of sales.

25


 

 

Change in Fair Value of Contingent Purchase Consideration

 

In connection with the acquisition of EOS in November 2013, we also recorded a purchase consideration liability equal to the estimated fair value of future payments that are contingent upon the achievement of various regulatory and sales milestones. Subsequent to the acquisition date, we re-measure contingent consideration arrangements at fair value each reporting period and record changes in fair value of contingent purchase consideration and foreign currency gains (losses) for changes in the foreign currency translation rate on the Consolidated Statements of Operations. Changes in fair value are primarily attributed to new information about the likelihood of achieving such milestones and the passage of time. In the absence of new information, changes in fair value reflect only the passage of time as we progress towards the achievement of future milestones. During the second quarter of 2016, we recorded a $25.5 million reduction in the fair value of the contingent purchase consideration liability due to our and our development partner’s decision to discontinue the development of lucitanib for breast cancer. At March 31, 2017, the contingent purchase consideration liability recorded on the Consolidated Balance Sheets was zero due to the uncertainty of achieving any of the lucitanib regulatory milestones.

 

Other Income and Expense

 

Other income and expense is primarily comprised of foreign currency gains and losses resulting from transactions with contract research organizations (“CROs”), investigational sites and contract manufacturers where payments are made in currencies other than the U.S. dollar. Other expense also includes interest expense recognized related to our convertible senior notes.

 

Critical Accounting Policies and Significant Judgments and Estimates

 

Our discussion and analysis of our financial condition and results of operations are based on our financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, expenses and revenue and related disclosures. On an ongoing basis, we evaluate our estimates and judgments, including those related to contingent purchase consideration, the allocation of purchase consideration, intangible asset impairment, clinical trial accruals and share-based compensation. We base our estimates on historical experience, known trends and events and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

 

For a description of our critical accounting policies, please see Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2016. There have not been any material changes to our critical accounting policies since December 31, 2016.

 

New Accounting Standards

 

From time to time, the Financial Accounting Standards Board (“FASB”) or other standards-setting bodies issue new accounting pronouncements. Updates to the FASB Accounting Standards Codification are communicated through the issuance of an Accounting Standards Update. Unless otherwise discussed, we believe that the impact of recently issued guidance, whether adopted or to be adopted in the future, is not expected to have a material impact on our Consolidated Financial Statements upon adoption.

 

To understand the impact of recently issued guidance, whether adopted or to be adopted, please review the information provided in Note 2, Summary of Significant Accounting Policies, in the Notes to the Unaudited Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q.

 

26


 

Results of Operations

 

Comparison of Three Months Ended March 31, 2017 and 2016:

 

The following table summarizes the results of our operations for the three months ended March 31, 2017 and 2016 (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Change

 

 

 

Three months ended March 31, 

 

Favorable/(Unfavorable)

 

 

    

2017

    

2016

    

$

    

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Product revenue, net

 

$

7,045

 

$

 —

 

$

7,045

 

 

n/a

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of sales - product

 

 

1,163

 

 

 —

 

 

(1,163)

 

 

n/a

 

Cost of sales - intangible asset amortization

 

 

372

 

 

 —

 

 

(372)

 

 

n/a

 

Research and development

 

 

32,447

 

 

74,608

 

 

42,161

 

 

57

%

Selling, general and administrative

 

 

29,224

 

 

9,827

 

 

(19,397)

 

 

(197)

%

Change in fair value of contingent purchase consideration

 

 

 —

 

 

516

 

 

516

 

 

n/a

 

 Total expenses

 

 

63,206

 

 

84,951

 

 

21,745

 

 

26

%

Operating loss

 

 

(56,161)

 

 

(84,951)

 

 

28,790

 

 

34

%

Other income (expense):

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

 

(2,581)

 

 

(2,104)

 

 

(477)

 

 

(23)

%

Foreign currency losses

 

 

(159)

 

 

(551)

 

 

392

 

 

71

%

Other income

 

 

354

 

 

25

 

 

329

 

 

n/a

 

Other income (expense), net

 

 

(2,386)

 

 

(2,630)

 

 

244

 

 

 9

%

Loss before income taxes

 

 

(58,547)

 

 

(87,581)

 

 

29,034

 

 

33

%

Income tax benefit

 

 

83

 

 

4,181

 

 

(4,098)

 

 

n/a

 

Net loss

 

$

(58,464)

 

$

(83,400)

 

$

24,936

 

 

30

%

 

Product Revenue, Net. Product revenue for the three months ended March 31, 2017 was due to the recognition of $7.0 million of net product revenue from the sale of our first commercial product, Rubraca, which was approved for sale in the United States markets and we began shipping on December 19, 2016. Revenue is recorded net sales deductions comprised of rebates, chargebacks and other discounts. Sales deductions represented approximately 10.8% of the gross product revenue recognized in the three months ended March 31, 2017 and are summarized as follows:

 

 

 

 

 

 

 

 

 

 

 

Three months ended March 31, 

 

 

  

2017

 

 

 

$

 

% of Gross Sales

 

 

 

(in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

Gross product revenue

 

$

7,902

 

 

100.0%

 

Sales deductions:

 

 

 

 

 

 

 

Government rebates and chargebacks

 

 

436

 

 

5.5%

 

Discounts and fees

 

 

421

 

 

5.3%

 

Total sales deductions

 

 

857

 

 

10.8%

 

Product revenue, net

 

$

7,045

 

 

89.2%

 

 

Cost of Sales – Product. Product cost of sales for the three months ended March 31, 2017 of $1.2 million relate to freight and royalties costs associated with Rubraca sales in the period. Manufacturing costs associated with sales in the quarter were expensed as incurred pre-commercialization of Rubraca, as is our policy, and therefore, were not included in product cost of sales for the three months ended March 31, 2017. We expect cost of sales to increase in relation to product revenues as we deplete these inventories.

 

Cost of Sales – Intangible Asset Amortization. In the three months ended March 31, 2017, we recognized cost of sales of $0.4 million associated with the amortization of capitalized milestone payments related to the FDA approval of

27


 

Rubraca. Prior to the FDA approval on December 16, 2016, all acquired license and milestone payments were expensed as incurred. 

 

Research and Development Expenses. Research and development expenses decreased during the three months ended March 31, 2017 compared to the same period in the prior year primarily due to lower research and development costs for rucaparib and rociletinib and classification of commercialization related expenses associated with Rubraca in selling, general and administrative expenses rather than research and development expenses. In the three months ended March 31, 2017, Rubraca commercialization costs included in selling, general and administrative expenses were $20.1 million.

 

Clinical trial costs for rucaparib were relatively flat compared to the same quarter a year ago as higher costs from enrollment in ARIEL4, our confirmatory ovarian cancer trials, and enrollment in our TRITON2 and TRITON3 studies for prostate cancer were largely offset by lower costs for the ARIEL2 and ARIEL3 studies, which have completed enrollment. Diagnostic development costs were $5.2 million lower compared to the prior year as the prior year first quarter included the costs associated with our collaboration with Foundation Medicine, Inc. to develop a novel companion diagnostic test to identify patients most likely to respond to rucaparib.  Finally, clinical supply and related manufacturing development costs were $3.4 million lower than the first quarter of 2016 due to the capitalization of these costs subsequent to the FDA approval of rucaparib.    

 

Clinical trial costs for rociletinib were $10.4 million lower than the first quarter in 2016 primarily due to the completion of patient enrollment for all of the TIGER studies in non-small cell lung cancer. In addition, clinical supply and related manufacturing development costs were $3.0 million lower than the first quarter in 2016 driven by timing of production to support our clinical studies.

 

Selling, General and Administrative Expenses. Selling, general and administrative expenses increased during the three months ended March 31, 2017 compared to the same period in the prior year primarily due mainly to classification of commercialization related expenses associated with Rubraca in selling, general and administrative expenses rather than research and development expenses.

 

Liquidity and Capital Resources

 

To date, we have funded our operations through the public offering of our common stock and the private placement of convertible debt securities and preferred stock. In January 2017, we sold 5,750,000 shares of our common stock in a public offering at $41.00 per share. The net proceeds from the offering were $221.2 million, after deducting underwriting discounts and commissions and offering expenses. At March 31, 2017, we had cash, cash equivalents and available-for-sale securities totaling $408.8 million.

 

The following table sets forth the primary sources and uses of cash for the three months ended March 31, 2017 and 2016 (in thousands):

 

 

 

 

 

 

 

 

 

 

 

Three months ended March 31, 

 

 

    

2017

    

2016

 

 

 

 

 

 

 

 

 

Net cash used in operating activities

 

$

(80,439)

 

$

(83,738)

 

Net cash (used in) provided by investing activities

 

 

(86,668)

 

 

24,396

 

Net cash provided by financing activities

 

 

226,898

 

 

705

 

Effect of exchange rate changes on cash and cash equivalents

 

 

72

 

 

254

 

Net increase (decrease) in cash and cash equivalents

 

$

59,863

 

$

(58,383)

 

 

Operating Activities

 

Net cash used in operating activities for all periods resulted primarily from our net losses adjusted for non-cash charges and changes in components of working capital. Net cash used in operating activities was slightly lower during the three months ended March 31, 2017 compared to same period in the prior year as a decrease in net loss was offset by increases in the operating assets and liabilities needed to support the commercialization of Rubraca, most notably related to inventory.

 

28


 

Investing Activities

 

Net cash used in investing activities for the three months ended March 31, 2017 includes purchases of available-for-sale securities of $133.0 million offset by cash from maturities of available-for-sale securities of $50.0 million. Net cash provided by investing activities in the same period in the prior year was mainly the result of maturities of available-for-sale securities of $25.0 million in that period. 

 

Financing Activities

 

Net cash provided by financing activities for the three months ended March 31, 2017 and 2016 includes $5.7 million and $0.7 million, respectively, received from employee stock option exercises. In addition, we completed the sale of $221.2 million of common stock, net of issuance costs, during the three months ended March 31, 2017. 

 

Operating Capital Requirements

 

We expect to incur significant losses for the foreseeable future, as we commercialize Rubraca and expand our selling, general and administrative functions to support the growth in our commercial organization. Additionally, our operating plan for the next 12 months includes a significant investment in inventory to meet the projected commercial requirements for Rubraca. We receive the active pharmaceutical ingredient in Rubraca from one supplier and we experience long lead times associated with its production. Accordingly, we expect to experience a decrease in our liquidity at the beginning of a production cycle and an increase as the inventory produced is sold through. 

 

As of March 31, 2017, we had cash, cash equivalents and available-for-sale securities totaling $408.8 million and total current liabilities of $58.9 million. In January 2017, we sold 5,750,000 shares of our common stock in a public offering at $41.00 per share. The net proceeds from the offering were $221.2 million, after deducting underwriting discounts and commissions and offering expenses. We intend to use the net proceeds of the offering for general corporate purposes, including commercial planning and sales and marketing expenses associated with the launch of Rubraca in the United States and, if approved by the EMA, in Europe, funding of our development programs, selling, general and administrative expenses, acquisition or licensing of additional product candidates or businesses and working capital. Based on current estimates, we believe that our existing cash, cash equivalents and available-for-sale securities will allow us to fund our operating plan through at least the next 12 months.

 

Because of the numerous risks and uncertainties associated with research, development and commercialization of pharmaceutical products, we are unable to estimate the exact amounts of our working capital requirements. Our future funding requirements will depend on many factors, including but not limited to:

 

·

the number and characteristics of the product candidates, companion diagnostics and indications we pursue;

·

the achievement of various development, regulatory and commercial milestones resulting in required payments to partners pursuant to the terms of our license agreements;

·

the scope, progress, results and costs of researching and developing our product candidates and related companion diagnostics and conducting clinical and non-clinical trials;

·

the timing of, and the costs involved in, obtaining regulatory approvals for our product candidates and companion diagnostics;

·

the cost of commercialization activities, including marketing and distribution costs;

·

the cost of manufacturing any of our product candidates we successfully commercialize;

·

the costs involved in preparing, filing, prosecuting, maintaining, defending and enforcing patent claims, including litigation costs and outcome of such litigation; and

·

the timing, receipt and amount of sales, if any, of our product candidates.

 

Contractual Obligations and Commitments

 

For a discussion of our contractual obligations, see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our 2016 Annual Report on Form 10-K. There have not been any material changes to such contractual obligations or potential milestone payments since December 31, 2016. For further information regarding our contractual obligations and commitments, see Note 14,  Commitments and Contingencies to our unaudited consolidated financial statements included elsewhere in this report.

   

29


 

ITEM 3.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

We are exposed to market risk related to changes in interest rates. As of March 31, 2017, we had cash, cash equivalents and available-for-sale securities of $408.8 million, consisting of bank demand deposits, money market funds and U.S. treasury securities. The primary objectives of our investment policy are to preserve principal and maintain proper liquidity to meet operating needs. Our investment policy specifies credit quality standards for our investments and limits the amount of credit exposure to any single issue, issuer or type of investment. Our primary exposure to market risk is interest rate sensitivity, which is affected by changes in the general level of U.S. interest rates, particularly because our investments are in short-term securities. Our available-for-sale securities are subject to interest rate risk and will decline in value if market interest rates increase. Due to the short-term duration of our investment portfolio and the low risk profile of our investments, an immediate 100 basis point change in interest rates would not have a material effect on the fair value of our portfolio. 

 

We contract with contract research organizations, investigational sites and contract manufacturers globally where payments are made in currencies other than the U.S. dollar. In addition, on October 3, 2016, we entered into a Manufacturing and Services Agreement with a Swiss company for the production and supply of the active ingredient for Rubraca. Under the terms of this agreement, payments for the supply of the active ingredient in Rubraca as well as scheduled capital program fee payment toward capital equipment and other costs associated with the construction of a dedicated production train will be made in Swiss francs. Once the production facility is operational, we are obligated to pay a fixed facility fee each quarter for the duration of the agreement, which expires on December 31, 2025.

 

As of March 31, 2017, $174.5 million of purchase commitments exist under the Swiss Manufacturing and Services Agreement and we are required to remit amounts due in Swiss francs. Due to other variables that may exist, it is difficult to quantify the impact of a particular change in exchange rates. However, we estimate that if the value of the US dollar was to strengthen by 10% compared to the value of Swiss franc as of March 31, 2017, it would decrease the total US dollar purchase commitment under the Swiss Manufacturing and Services Agreement by approximately $15.9 million. Similarly, a 10% weakening of the US dollar compared to the Swiss franc would increase the total US dollar purchase commitment by approximately $19.4 million.

 

While we periodically hold foreign currencies, primarily Euro and Pound Sterling, we do not use other financial instruments to hedge our foreign exchange risk. Transactions denominated in currencies other than the functional currency are recorded based on exchange rates at the time such transactions arise. As of both March 31, 2017 and December 31, 2016, approximately 1% of our total liabilities were denominated in currencies other than the functional currency.

 

ITEM 4.CONTROLS AND PROCEDURES

 

Disclosure Controls and Procedures

 

Our disclosure controls and procedures are designed to ensure that information required to be disclosed in the reports we file or submit under the Securities Exchange Act of 1934, as amended (“Exchange Act”) is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to our management, including the Chief Executive Officer and the Principal Financial and Accounting Officer, to allow timely decisions regarding required disclosures. Any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objective. With the participation of our Chief Executive Officer and Principal Financial and Accounting Officer, management performed an evaluation as of March 31, 2017 of the effectiveness of the design and operation of our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act. Based on this evaluation, our Chief Executive Officer and Principal Financial and Accounting Officer concluded that, as of March 31, 2017, our disclosure controls and procedures were effective at the reasonable assurance level.

 

Changes in Internal Control over Financial Reporting

 

In December 2016, we began recording revenue, and in January 2017, began recording inventory related to our newly approved product, Rubraca. We have performed a variety of reconciliations and have implemented certain internal controls processes in various functional areas to ensure that financial data related to Rubraca revenue and inventory

30


 

activity has been correctly reflected in our financial statements. We are not aware of any material adverse impacts on our internal controls over financial reporting as a result of the implementation of these new controls. There were no changes in our internal control over financial reporting during the quarter ended March 31, 2017 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

31


 

PART II. OTHER INFORMATION

 

ITEM 1.LEGAL PROCEEDINGS

 

On November 19, 2015, Steve Kimbro, a purported shareholder of Clovis, filed a purported class action complaint (the “Kimbro Complaint”) against Clovis and certain of its officers in the United States District Court for the District of Colorado. The Kimbro Complaint purports to be asserted on behalf of a class of persons who purchased Clovis stock between October 31, 2013 and November 15, 2015. The Kimbro Complaint generally alleges that Clovis and certain of its officers violated federal securities laws by making allegedly false and misleading statements regarding the progress toward FDA approval and the potential for market success of rociletinib. The Kimbro Complaint seeks unspecified damages.

 

Also on November 19, 2015, a second purported shareholder class action complaint was filed by Sonny P. Medina, another purported Clovis shareholder, containing similar allegations to those set forth in the Kimbro Complaint, also in the United States District Court for the District of Colorado (the “Medina Complaint”). The Medina Complaint purports to be asserted on behalf of a class of persons who purchased Clovis stock between May 20, 2014 and November 13, 2015. On November 20, 2015, a third complaint was filed by John Moran in the United States District Court for the Northern District of California (the “Moran Complaint”). The Moran Complaint contains similar allegations to those asserted in the Kimbro and Medina Complaints and purports to be asserted on behalf of a plaintiff class who purchased Clovis stock between October 31, 2013 and November 13, 2015.

 

On December 14, 2015, Ralph P. Rocco, a fourth purported shareholder of Clovis, filed a complaint in the United States District Court for the District of Colorado (the “Rocco Complaint”). The Rocco Complaint contains similar allegations to those set forth in the previous complaints and purports to be asserted on behalf of a plaintiff class who purchased Clovis stock between October 31, 2013 and November 15, 2015.

 

On January 19, 2016, a number of motions were filed in both the District of Colorado and the Northern District of California seeking to consolidate the shareholder class actions into one matter and for appointment of a lead plaintiff. All lead plaintiff movants other than M. Arkin (1999) LTD and Arkin Communications LTD (the “Arkin Plaintiffs”) subsequently filed notices of non-opposition to the Arkin Plaintiffs’ application.

 

On February 2, 2016, the Arkin Plaintiffs filed a motion to transfer the Moran Complaint to the District of Colorado (the “Motion to Transfer”). Also on February 2, 2016, the defendants filed a statement in the Northern District of California supporting the consolidation of all actions in a single court, the District of Colorado. On February 3, 2016, the Northern District of California court denied without prejudice the lead plaintiff motions filed in that court pending a decision on the Motion to Transfer.

 

On February 16, 2016, the defendants filed a memorandum in support of the Motion to Transfer, and plaintiff Moran filed a notice of non-opposition to the Motion to Transfer. On February 17, 2016, the Northern District of California court granted the Motion to Transfer.

 

On February 18, 2016, the Medina court issued an opinion and order addressing the various motions for consolidation and appointment of lead plaintiff and lead counsel in the District of Colorado actions. By this ruling, the court consolidated the Medina, Kimbro and Rocco actions into a single proceeding. The court also appointed the Arkin Plaintiffs as the lead plaintiffs and Bernstein Litowitz Berger & Grossman as lead counsel for the putative class.

 

On April 1, 2016, the Arkin Plaintiffs and the defendants filed a stipulated motion to set the schedule for the filing of a consolidated complaint in the Medina, Kimbro and Rocco actions (the “Consolidated Complaint”) and the responses thereto, including the defendants’ motion to dismiss the Consolidated Complaint (the “Motion to Dismiss”), and to stay discovery and related proceedings until the District of Colorado issues a decision on the Motion to Dismiss. The stipulated motion was entered by the District of Colorado on April 4, 2016.

 

Subject to further agreed-upon extensions by the parties, the Arkin Plaintiffs filed a Consolidated Complaint on May 6, 2016. The Consolidated Complaint names as defendants the Company and certain of its current and former officers (the “Clovis Defendants”), certain underwriters (the “Underwriter Defendants”) for a Company follow-on offering conducted in July 2015 (the “July 2015 Offering”) and certain Company venture capital investors (the “Venture Capital Defendants”). The Consolidated Complaint alleges that defendants violated particular sections of the Securities

32


 

Exchange Act of 1934 (the “Exchange Act”) and the Securities Act of 1933 (the “Securities Act”). The purported misrepresentations and omissions concern allegedly misleading statements about rociletinib. The consolidated action is purportedly brought on behalf of investors who purchased the Company’s securities between May 31, 2014 and April 7, 2016 (with respect to the Exchange Act claims) and investors who purchased the Company’s securities pursuant or traceable to the July 2015 Offering (with respect to the Securities Act claims). The Consolidated Complaint seeks unspecified compensatory and recessionary damages.

 

On May 23, 2016, the Medina, Kimbro, Rocco, and Moran actions were consolidated for all purposes in a single proceeding in the District of Colorado.

 

The Clovis Defendants, the Underwriter Defendants and the Venture Capital Defendants filed a Motion to Dismiss on July 27, 2016, the Arkin Plaintiffs filed their opposition on September 23, 2016, and the defendants filed their replies on October 14, 2016.

 

On February 9, 2017, Judge Raymond P. Moore of the District of Colorado issued an Opinion and Order granting in part and denying in part the Clovis Defendants’ Motion to Dismiss. The Clovis Defendants’ Motion to Dismiss was granted with prejudice with respect to named defendant Gillian Ivers-Read and granted with respect to certain statements determined by the Court to be nonactionable statements of opinion or optimism. The Clovis Defendants’ Motion to Dismiss was otherwise denied. Next, the Court granted in part and denied in part the Underwriter Defendants’ Motion to Dismiss. The Underwriter Defendants’ Motion to Dismiss was granted without prejudice with respect to Plaintiffs’ claim under Section 12(a) of the Securities Act and granted insofar as the Court determined that certain statements challenged under Section 11 of the Securities Act are nonactionable statements of opinion or optimism. The Opinion and Order provided that Plaintiffs shall have until February 23, 2017 to file an amended pleading directed solely as to their Section 12(a) claim against the Underwriter Defendants. The Underwriters Defendants’ Motion to dismiss was otherwise denied.  Finally, the court granted the Venture Capital Defendants’ Motion to Dismiss with prejudice.

 

On April 11, 2017, the Court entered a scheduling order providing for, inter alia, a schedule for completing document and fact discovery, as well as setting briefing schedules for motions for class certification and motions for summary judgment.

 

On March 14, 2017, the Clovis Defendants and the Arkin Plaintiffs participated in a mediation, which did not result in a settlement. We intend to vigorously defend the lawsuit, but there can be no assurance that the defense will be successful.

 

On January 22, 2016, the Electrical Workers Local #357 Pension and Health & Welfare Trusts, a purported shareholder of Clovis, filed a purported class action complaint (the “Electrical Workers Complaint”) against Clovis and certain of its officers, directors, investors and underwriters in the Superior Court of the State of California, County of San Mateo. The Electrical Workers Complaint purports to be asserted on behalf of a class of persons who purchased stock in Clovis’ July 8, 2015 follow-on offering. The Electrical Workers Complaint generally alleges that the defendants violated the Securities Act because the offering documents for the July 8, 2015 follow-on offering contained allegedly false and misleading statements regarding the progress toward FDA approval and the potential for market success of rociletinib. The Electrical Workers Complaint seeks unspecified damages.

 

On February 25, 2016, the defendants removed the case to the United States District Court for the Northern District of California and thereafter moved to transfer the case to the District of Colorado (“Motion to Transfer”). On March 2, 2016, the plaintiff filed a motion to remand the case to San Mateo County Superior Court (“Motion to Remand”). Following briefing on the Motion to Transfer and the Motion to Remand, the Northern District of California held a hearing on April 18, 2016 concerning the Motion to Remand, at the conclusion of which the court granted to the Motion to Remand. On May 5, 2016, the Northern District of California issued a written decision and order granting the Motion to Remand the case to the Superior Court, County of San Mateo and denying the Motion to Transfer as moot.

 

While the case was pending in the United States District Court for the Northern District of California, the parties entered into a stipulation extending the defendants’ time to respond to the Electrical Workers Complaint for 30 days following the filing of an amended complaint by plaintiff or the designation by plaintiff of the Electrical Workers Complaint as the operative complaint.  Following remand, Superior Court of the State of California, County of San Mateo so-ordered the stipulation on June 22, 2016.

 

33


 

On June 30, 2016, the Electrical Workers Plaintiffs filed an amended Complaint (the “Amended Complaint”). The Amended Complaint names as defendants the Company and certain of its current and former officers and directors, certain underwriters for the July 2015 Offering and certain Company venture capital investors. The Amended Complaint purports to assert claims under the Securities Act based upon alleged misstatements in Clovis’ offering documents for the July 2015 Offering. The Amended Complaint includes new allegations about the Company’s rociletinib disclosures.  The Amended Complaint seeks unspecified damages. 

 

Pursuant to a briefing schedule ordered by the court on July 28, 2016, defendants filed a motion to stay the Electrical Workers action pending resolution of the Medina, Kimbro, Moran, and Rocco actions in the District of Colorado (“Motion to Stay”), and a demurrer to the Amended Complaint, on August 15, 2016; plaintiffs filed their oppositions on August 31, 2016; and the defendants filed their reply briefs on September 15, 2016.  On September 23, 2016, after hearing oral argument, the San Mateo Superior Court granted defendants’ motion to stay proceedings pending resolution of the related securities class action captioned Medina v. Clovis Oncology, Inc., et. al., No. 1:15-cv-2546 (the “Colorado Action”).  Per the order to stay proceedings, the San Mateo Superior Court will defer issuing a ruling on defendants’ pending demurrer, and the parties’ first status report as to the progress of the Colorado Action was filed with the San Mateo Superior Court on March 23, 2017. The parties’ second status report as to the progress of the Colorado Action is due on September 21, 2017.

 

The Company intends to vigorously defend against the allegations contained in the Electrical Workers Amended Complaint, but there can be no assurance that the defense will be successful.

 

On November 10, 2016, Antipodean Domestic Partners (“Antipodean”) filed a complaint (the “Antipodean Complaint”) against Clovis and certain of its officers, directors and underwriters in New York Supreme Court, County of New York. The Antipodean Complaint alleges that the defendants violated certain sections of the Securities Act by making allegedly false statements to Antipodean and in the Offering Materials for the Secondary Offering relating to the efficacy of rociletinib, its safety profile, and its prospects for market success. In addition to the Securities Act claims, the Antipodean Complaint also asserts Colorado state law claims, and common law claims. Both the state law and common law claims are based on the allegedly false and misleading statements regarding rociletinib’s progress toward FDA approval. The Antipodean Complaint seeks compensatory, recessionary, and punitive damages.

 

On December 15, 2016, the Antipodean Plaintiffs filed an amended complaint (“the Amended Complaint”) asserting substantially the same claims against the same defendants. The Amended Complaint purports to correct certain details in the original Complaint.

 

On January 21, 2017, the parties entered into a stipulation extending the defendants’ time to respond to the Antipodean Amended Complaint until March 29, 2017, subject to the terms and conditions stated therein. Pursuant to the January 21, 2017 stipulation, the defendants filed a motion to stay the Antipodean action pending resolution of the Medina, Kimbro, Moran, and Rocco actions in the District of Colorado (“Motion to Stay”) on January 31, 2017; the plaintiff filed their opposition on March 17, 2017; and the defendants filed their reply brief on March 23, 2017. Also pursuant to the January 21, 2017 stipulation, the defendants filed a motion to dismiss the Antipodean Amended Complaint (“Motion to Dismiss”) on March 29, 2017. Pursuant to a briefing schedule ordered by the court on April 17, 2017, the plaintiff’s opposition briefs are due on April 27, 2017 and the defendants’ reply briefs are due on May 11, 2017. Pursuant to the April 17, 2017 order, the Motion to Stay and Motion to Dismiss will be decided by the Court together.    

 

On March 14, 2017, the Clovis Defendants and Antipodean participated in a mediation, which did not result in a settlement. We intend to vigorously defend against the allegations in the Antipodean Amended Complaint.  However, there can be no assurance that the defense will be successful.

 

We received a letter dated May 31, 2016 from an alleged owner of our common stock, which purports to set forth a demand for inspection of certain of our books and records pursuant to 8 Del. C. § 220 (the “Macalinao Demand Letter”). The Macalinao Demand Letter was purportedly made for the purposes of investigating alleged misconduct at the Company relating to rociletinib. On June 24, 2016, we submitted a response to the Macalinao Demand Letter. We believe that the allegations in the Macalinao Demand Letter are unfounded, but there can be no assurance about the likelihood of an adverse outcome. In January 2017, the Company produced certain books and records in response to the Macalinao Demand Letter.

 

34


 

On March 31, 2017, the purported shareholder filed under seal a shareholder derivative complaint (the “Macalinao Complaint”) against certain directors and an officer of the Company in the Court of Chancery of the State of Delaware.  On April 5, 2017, a public version of the Macalinao Complaint was filed.  The Macalinao Complaint purports to rely on documents produced in response to the Macalinao Demand Letter. The Macalinao Complaint generally alleges that the defendants breached their fiduciary duties owed to the Company by allegedly causing or allowing misrepresentations of the Company’s business operations and prospects.  The Macalinao Complaint also alleges claims for unjust enrichment.  Finally, the Macalinao Complaint also alleges that certain director defendants engaged in insider trading.  The Macalinao Complaint seeks, among other things, an award of money damages.

 

The Company intends to vigorously defend against the allegations contained in the Macalinao Complaint, but there can be no assurance that the defense will be successful.

 

We received a letter dated December 15, 2016 from a second alleged owner of our common stock, which purports to set forth a demand for inspection of the Company’s books and records pursuant to 8 Del. C. § 220 (the “McKenry Demand Letter”). The McKenry Demand Letter was purportedly made for the purposes of investigating alleged misconduct at the Company relating to rociletinib. On January 4, 2017, we submitted a response to the McKenry Demand Letter. The Company believes that the allegations in the McKenry Demand Letter are unfounded, but there can be no assurance about the likelihood of an adverse outcome. In February 2017, the Company produced certain books and records in response to the McKenry Demand Letter.

 

On March 23, 2017, the second purported shareholder filed under seal a shareholder derivative complaint (the “McKenry Complaint”) against certain directors and an officer of the Company in the Court of Chancery of the State of Delaware. On March 27, 2017, a public version of the McKenry Complaint was filed. The McKenry Complaint purports to rely on documents produced in response to the McKenry Demand Letter. The McKenry Complaint generally alleges that the defendants breached their fiduciary duties owed to the Company by failing to properly ensure that the TIGER-X clinical trial was being conducted in accordance with applicable rules, regulations and protocol, and by allowing Clovis representatives to make materially misleading statements about the success of rociletinib. The McKenry Complaint seeks, among other things, an award of money damages.

 

The Company intends to vigorously defend against the allegations contained in the McKenry Complaint, but there can be no assurance that the defense will be successful.

 

On March 20, 2017, a purported shareholder of the Company, filed a shareholder derivative complaint (the “Guo Complaint”) against certain officers and directors of the Company in the United States District Court for the District of Colorado. The Guo Complaint generally alleges that the defendants breached their fiduciary duties owed to the Company by either recklessly or with gross negligence approving or permitting misrepresentations of the Company’s business operations and prospects. The Guo Complaint also alleges claims for waste of corporate assets and unjust enrichment.  Finally, the Guo Complaint also alleges that certain of the individual defendants violated Section 14(a) of the Securities Exchange Act, by allegedly negligently issuing, causing to be issued, and participating in the issuance of materially misleading statements to stockholders which were contained in the Company’s Proxy Statement on Schedule DEF 14A in connection with the 2015 Annual Meeting of Stockholders, held on June 11, 2015. The Guo Complaint seeks, among other things, an award of money damages.

 

The Company intends to vigorously defend against the allegations contained in the Guo Complaint, but there can be no assurance that the defense will be successful.

 

We have received requests for information from governmental agencies relating to our regulatory update announcement in November 2015 that the FDA requested additional clinical data on the efficacy and safety of rociletinib. We are cooperating with the inquiries.

 

 

ITEM 1A.RISK FACTORS

 

Our business faces significant risks and uncertainties. Certain factors may have a material adverse effect on our business prospects, financial condition and results of operations, and you should carefully consider them. Accordingly, in evaluating our business, we encourage you to consider the risk factors described under the heading “Risk Factors” in Part I, Item 1A of our most recent Annual Report on Form 10-K, in addition to other information contained in or incorporated

35


 

by reference into this Quarterly Report on Form 10-Q and our other public filings with the SEC. Other events that we do not currently anticipate or that we currently deem immaterial may also affect our business, prospects, financial condition and results of operations.

 

There have been no material changes to the risk factors included in our previously filed Annual Report on Form 10-K for the year ended December 31, 2016. Additional risks and uncertainties not presently known to us or that we currently believe are immaterial also may negatively impact our business.

 

ITEM 2.UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

 

None.

 

ITEM 3.DEFAULTS UPON SENIOR SECURITIES

 

None.

 

ITEM 4.MINE SAFETY DISCLOSURES

 

Not Applicable.

 

ITEM 5.OTHER INFORMATION

 

None.

 

ITEM 6.EXHIBITS

 

INDEX TO EXHIBITS

 

o

 

Exhibit

 

Number

Exhibit Description

 

 

3.1(5)

Amended and Restated Certificate of Incorporation of Clovis Oncology, Inc.

 

 

3.2(5)

Amended and Restated Bylaws of Clovis Oncology, Inc.

 

 

4.1(3)

Form of Common Stock Certificate of Clovis Oncology, Inc.

 

 

4.2(8)

Indenture dated as of September 9, 2014, by and between Clovis Oncology, Inc. and The Bank of New York Mellon Trust Company, N.A.

 

 

10.1*(4)

Amended and Restated Strategic License Agreement, dated as of June 16, 2011, by and between Clovis Oncology, Inc. and Avila Therapeutics, Inc.

 

 

10.2*(4)

License Agreement, dated as of June 2, 2011, by and between Clovis Oncology, Inc. and Pfizer Inc.

 

 

10.3+(1)

Clovis Oncology, Inc. 2009 Equity Incentive Plan.

 

 

10.4+(4)

Clovis Oncology, Inc. 2011 Stock Incentive Plan.

 

 

10.5+(1)

Form of Clovis Oncology, Inc. 2009 Equity Incentive Plan Stock Option Agreement.

 

 

10.6+(4)

Form of Clovis Oncology, Inc. 2011 Stock Incentive Plan Stock Option Agreement.

 

 

10.7+(3)

Employment Agreement, dated as of August 24, 2011, between Clovis Oncology, Inc. and Patrick J. Mahaffy.

 

 

10.8+(3)

Employment Agreement, dated as of August 24, 2011, between Clovis Oncology, Inc. and Erle T. Mast.

 

 

36


 

10.9+(3)

Employment Agreement, dated as of August 24, 2011, between Clovis Oncology, Inc. and Gillian C. Ivers-Read.

 

 

10.10+(1)

Indemnification Agreement, dated as of May 15, 2009, between Clovis Oncology, Inc. and Paul Klingenstein.

 

 

10.11+(1)

Indemnification Agreement, dated as of May 15, 2009, between Clovis Oncology, Inc. and James C. Blair.

 

 

10.12+(1)

Indemnification Agreement, dated as of May 15, 2009, between Clovis Oncology, Inc. and Edward J. McKinley.

 

 

10.13+(1)

Indemnification Agreement, dated as of May 15, 2009, between Clovis Oncology, Inc. and Thorlef Spickschen.

 

 

10.14+(1)

Indemnification Agreement, dated as of May 15, 2009, between Clovis Oncology, Inc. and M. James Barrett.

 

 

10.15+(1)

Indemnification Agreement, dated as of May 15, 2009, between Clovis Oncology, Inc. and Brian G. Atwood.

 

 

10.16+(1)

Indemnification Agreement, dated as of May 12, 2009, between Clovis Oncology, Inc. and Patrick J. Mahaffy.

 

 

10.17+(1)

Indemnification Agreement, dated as of May 12, 2009, between Clovis Oncology, Inc. and Erle T. Mast.

 

 

10.18+(1)

Indemnification Agreement, dated as of May 12, 2009, between Clovis Oncology, Inc. and Gillian C. Ivers-Read.

 

 

10.19+(4)

Clovis Oncology, Inc. 2011 Employee Stock Purchase Plan.

 

 

10.20+(4)

Clovis Oncology, Inc. 2011 Cash Bonus Plan.

 

 

10.21+(2)

Indemnification Agreement, dated as of June 13, 2013, between Clovis Oncology, Inc. and Ginger L. Graham.

 

 

10.22+(2)

Indemnification Agreement, dated as of June 13, 2013, between Clovis Oncology, Inc. and Keith Flaherty.

 

 

10.23(7)

Stock Purchase Agreement, dated as of November 19, 2013, by and among the Company, EOS, the Sellers listed on Exhibit A thereto and Sofinnova Capital V FCPR, acting in its capacity as the Sellers’ Representative.

 

 

10.24*(7)

Development and Commercialization Agreement, dated as of October 24, 2008, by and between Advenchen Laboratories LLC and Ethical Oncology Science S.p.A., as amended by the First Amendment, dated as of April 13, 2010 and the Second Amendment, dated as of July 30, 2012.

 

 

10.25*(7)

Collaboration and License Agreement, dated as of September 28, 2012, by and between Ethical Oncology Science S.p.A. and Les Laboratoires Servier and Institut de Recherches Internationales Servier.

 

 

10.26+(12)

Indemnification Agreement, dated as of January 29, 2016, by and between Clovis Oncology, Inc. and Lindsey Rolfe.

 

 

10.27+(12)

Employment Agreement, dated as of February 25, 2016, by and between Clovis Oncology, Inc. and Lindsey Rolfe.

 

 

37


 

10.28+(12)

Indemnification Agreement, dated as of January 26, 2016, by and between Clovis Oncology, Inc. and Dale Hooks.

 

 

10.29+(12)

Employment Agreement, dated as of January 26, 2016, by and between Clovis Oncology, Inc. and Dale Hooks.

 

 

10.30+(9)

Indemnification Agreement, dated as of February 17, 2016, by and between Clovis Oncology, Inc. and Daniel W. Muehl.

 

 

10.31+(10)

Offer Letter, dated as of May 27, 2015, by and between Clovis Oncology, Inc. and Daniel W. Muehl.

 

 

10.32+(10)

Salary Waiver Letter, dated as of May 9, 2016, by and between Clovis Oncology, Inc. and Patrick J. Mahaffy.

 

 

10.33*(11)

 

First Amendment to License Agreement, by and between Clovis Oncology, Inc. and Pfizer Inc., dated as of August 30, 2016.

 

 

10.34+(13)

Form of Clovis Oncology, Inc. 2011 Stock Incentive Plan RSU Agreement.

10.35*(13)

Manufacturing Services Agreement, by and between Clovis Oncology, Inc. and Lonza Ltd, dated as of October 3, 2016.

 

 

10.39*

Strata Trial Collaboration Agreement, by and between Clovis Oncology, Inc. and Strata Oncology, Inc., dated as of January 30, 2017

 

 

31.1

Certification of principal executive officer pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as amended.

 

 

31.2

Certification of principal financial officer pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as amended.

 

 

32.1

Certification of principal executive officer pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

 

 

32.2

Certification of principal financial officer pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

 

 

101

The following materials from Clovis Oncology, Inc.’s Quarterly Report on Form 10-Q for the period ended March 31, 2017, formatted in XBRL (eXtensible Business Reporting Language): (i) the Consolidated Statements of Operations, (ii) the Consolidated Statements of Comprehensive Loss, (iii) the Consolidated Balance Sheets, (iv) the Consolidated Statements of Cash Flows and (v) Notes to Unaudited Consolidated Financial Statements.

 

(1)

Filed as an exhibit with the Registrant’s Registration Statement on Form S-1 (File No. 333-175080) on June 23, 2011.

(2)

Filed as an exhibit with the Registrant’s Current Report on Form 8-K (File No. 001-35347) on June 14, 2013.

(3)

Filed as an exhibit with Amendment No. 2 to the Registrant’s Registration Statement on Form S-1 (File No. 333-175080) on August 31, 2011.

(4)

Filed as an exhibit with Amendment No. 3 to the Registrant’s Registration Statement on Form S-1 (File No. 333-175080) on October 31, 2011.

(5)

Filed as an exhibit with the Registrant’s Annual Report on Form 10-K on March 15, 2012.

(6)

Filed as an exhibit with the Registrant’s Registration Statement on Form S-1 (File No. 333-180293) on March 23, 2012.

(7)

Filed as an exhibit with the Registrant’s Current Report on Form 8-K (File No. 001-35347) on November 19, 2013.

(8)

Filed as an exhibit with the Registrant’s Current Report on Form 8-K (File No. 001-35347) on September 9, 2014.

(9)

Filed as an exhibit with the Registrant’s Current Report on Form 8-K (File No. 001-35347) on April 1, 2016.

(10)

Filed as an exhibit with the Registrant’s Quarterly Report on Form 10-Q on May 9, 2016.

(11)

Filed as an exhibit with the Registrant’s Quarterly Report on Form 10-Q on November 4, 2016.

38


 

(12)

Filed as an exhibit with the Registrant’s Annual Report on Form 10-K on February 29, 2016.

(13)

Filed as an exhibit with the Registrant’s Annual Report on Form 10-K on February 23, 2017.

+     Indicates management contract or compensatory plan.

*     Confidential treatment has been sought with respect to portions of this exhibit, which portions have been omitted and filed separately with the Securities and Exchange Commission.

39


 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

 

 

 

 

Date: May 4, 2017

CLOVIS ONCOLOGY, INC.

 

 

 

 

 

By:

  

/s/ PATRICK J. MAHAFFY

 

 

 

Patrick J. Mahaffy

 

 

 

President and Chief Executive Officer; Director

 

 

 

 

 

By:

  

/s/ DANIEL W. MUEHL

 

 

 

Daniel W. Muehl

 

 

 

Senior Vice President of Finance and Principal Financial and Accounting Officer

 

 

40