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Clovis Oncology, Inc. (NASDAQ:CLVS)

Q2 2013 Earnings Conference Call

August 01, 2013, 8:30 AM ET

Executives

Anna Sussman – Investor Relations

Patrick Mahaffy – President and CEO

Erle Mast – EVP and CFO

Analysts

Charles Duncan - Piper Jaffray

Ravi Mehrotra - Credit Suisse

Peter Lawson - Mizuho Securities, USA

Marko Kozul - Leerink Swann

Operator

Good day ladies and gentlemen and welcome to the Q2, 2013 Clovis Oncology Inc. Earnings Conference Call. My name is Delieu and I will be your operator for today. At this time all participants are be in a listen-only mode. We will conduct a question-and-answer session towards the end of this conference. (Operator Instructions). As a reminder this call is being recorded for replay purposes.

I would now like to turn the call over to Ms. Anna Sussman, Senior Director of Investor Relations. Please proceed ma'am.

Anna Sussman

Thank you, Deleiu. Good morning, everyone. Welcome to the Clovis Oncology second quarter 2013 conference call. You should have received the news release announcing our second quarter results. If not, it is available on our website.

As a reminder this conference call is being recorded and webcast. Remarks maybe accessed live during our webcast -- on our website during the call and will be available in an archive for the next several weeks.

The agenda for today’s call is as follows. Patrick Mahaffy, Clovis’ President and CEO will discuss the highlights of the second quarter of 2013 and provide an update on our clinical development program. Then Erle Mast, our Chief Financial Officer will cover the financial results for the quarter in more detail and comment on the company’s outlook for 2013. Patrick will make a few closing remarks and then we will open the call for Q&A. And our Chief Medical Officer, Andrew Allen is also on the call.

Before we begin please note that during today’s conference call we may make forward-looking statements within the meaning of the federal securities laws, including statements concerning our financial outlook and expected business plans. All of these statements are subject to risks and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. Please refer to our recent filings with the SEC for a full review of the risks and uncertainties associated with our business. Forward-looking statements speak only as of the date on which they are made and Clovis undertakes no obligation to update or revise any forward-looking statements.

Now I will turn the call over to Patrick Mahaffy.

Patrick Mahaffy

Thanks Anna. Welcome everybody. Thank you for joining us this morning. We made very important progress during the second in our clinical development programs. At ASCO in June we announced encouraging initial responses in patients enrolled in the dose finding portion of our ongoing studies for both CO-1686 and Rucaparib and we look forward to providing updates for each study at medical conferences this fall. We have selected a dose Rucaparib for use in the Phase II biomarker trial and pivotal Phase III trial, both of which are scheduled to commence enrollment later this year and for 1686 we have identified a starting dose for the improved hydrobromide salt tablet formulation which we plan to introduce later this month into the ongoing dose finding portion of the Phase I/II study.

This morning I'd like to take the opportunity to highlight our plans and expectations for our clinical development programs for 1686 and Rucaparib for the remainder of the year. 1686 is our oral targeted small molecule covalent inhibitor of the mutant forms of epidermal growth factor receptor or EGFR for the treatment of non-small cell lung cancer. 1686 targets both the initial activating EGFR mutations as well the dominant resistant mutation T790M. And it has the potential to treat non-small cell lung cancer patients for EGFR mutations, both as a first line and second line treatment.

Importantly because 1886 spares wild or normal EGFR it has the potential to cause a lower incidence of toxicity such as skin rash and diarrhea that are normally associated with other EGFR inhibitors. At ASCO in June we reported initial findings from the phase portion of the phase I/II study currently underway. These results include the following: Four resist partial responses were observed in heavily pre-treated T790M positive patients, three out of four evaluable T790M positive patients who were treated at the 900 milligram BD or twice daily dose achieved PRs, the fourth had stable disease. 1686 appeared to be well tolerated with no evidence of wild type EGFR inhibition.

Importantly and as expected, 1686 activity is correlated with higher drug exposure. Specifically we observed that maintenance of [higher] plasma concentrations over 200 nanograms per mil for greater than 16 hours is associated with superior progression free survival versus for patients with shorter exposures.

I'd like to take the opportunity today to provide an update of the current status of these patients. All four of the patients who had reached PRs announced at ASCO continued to be PRs. These patients have now been on CO-1686 therapy in a range of approximately four to eight months duration. Additionally we have enrolled 11 more patients into the Phase I dose escalation study with a capsule formulation at the current dose of 900 milligrams twice daily. We plan to enroll two additional patients in early August for a total of 19 patients enrolled at this dose. This number includes both T790M positive and T790M negative patients. We do not yet know what percentage of these patients are T790M positive.

Moving forward, these patients will be grouped together as the 900 milligram BID cohort in the ongoing Phase I portion of the phase I/II trial, and updates will be provided at medical meetings.

The first update of the Phase I data will be in an oral presentation at the 15th World Conference on Lung Cancer in Sydney, Australia, on Monday October 28, book your flights now. Since the MTD has not yet been achieved, we will continue dose escalation of on he study with a tablet formulation later this month. To-date, we do not see evidence of wild-type inhibition. We have not seen any serious diarrhea or any cases of rash. As we get to higher doses, we are of course beginning to see other toxicities and expect that we will define a dose-limiting toxicity and establish a Phase II dose by year-end, cannot today, however, know what that dose-limiting toxicity will be.

During the quarter, we completed the study of 1686 in healthy human volunteers which compared the PK properties of our hydrobromide salt tablet formulation with the current capsule formulation. As expected and consistent with animal studies, the tablet formulation demonstrated improved exposures and reduced variability. Based on data from this study, we have selected a starting dose of 500 milligrams BID for the tablet formulation, and we expect to start dosing patients with this formulation later this month.

As noted, we expect to achieve the recommended Phase II dose by the end of the year and to then initiate the Phase II expansion cohorts with the tablet formulation. The two cohorts include a study of 1686 in non-small cell lung cancer patients who have progressed while on treatment with EGFR directed therapy such as Tarceva or Iressa and have developed the T790M-resistant mutation, which we expect to initiate by like 2013 and a study of 1686 in an expansion cohort of newly diagnosed patients who express the activating mutations of EGFR which we expect to initiate in early 2014.

By inhibiting both the activating mutations of EGFR and its dominant resistance mutation, we are able to demonstrate a meaningful progression-free survival benefit compared to what has been seen to-date for Tarceva or afatinib or other TKI therapies, we would be in a position to move 1686 into a frontline development program. Each of these cohorts calls will number approximately 40 patients.

Pending data from the second line T790M positive cohort, our goal is to commence a registration study in the second half of 2014 in this population. We also plan to initiate a Phase I study of the tablet formulation in Japan in early 2014. Also during the quarter, we received orphan drug designation from the FDA for 1686 for the treatment of EGFR mutated non-small cell lung cancer. It goes without saying that 1686 has generated a lot of attention from the clinical community, and we are very excited about the potential for this program.

Now turning to rucaparib. Rucaparib is our oral, potent, small-molecule inhibitor, PARP1 and PARP2, which we are exploring as both the monotherapy and in combination with chemotherapeutic agents in ovarian cancer patients who are predisposed to PARP-inhibitor sensitivity. At ASCO in June, we reported initial findings from the dose finding Phase I study currently underway.

These results included the following: Objective responses were observed in BRCA-mutant ovarian, breast, and pancreatic cancer patients. 89% clinical benefit rate observed in BRCA-mutant ovarian cancer patients across all doses. Rucaparib is well-tolerated at doses studied, and consistent therapeutic drug exposures were observed with twice daily dosing with predictable exposures for a given oral dose. This is important that this can potentially reduce the risks of under or over dosing when uniform drug doses are administered to patients. We have positive updates for these patients as well. These are the patients who had achieved the PR and was active on study at ASCO has maintained their partial response.

As we mentioned last quarter, we believe we were close to establishing a dose and that we were pleased with the drug plasma levels, the evidence of efficacy, and the disease control we had observed to-date.

And I’ll tell you that based on data from the dose finding Phase I study, we had determined or recommended Phase II and Phase III monotherapy dose in schedule of 600 milligrams twice daily. We expect to initiate a Phase II single-arm study to assess the efficacy of rucaparib in women with recurrent platinum sensitive high grade serious ovarian cancer in the fourth quarter. We have previously referred to this study as the biomarker study, but have now named it as ARIEL2, the assessment of rucaparib in ovarian cancer Phase II trial.

We also expect to initiate a global Phase III registration switch maintenance study for rucaparib in platinum-sensitive ovarian cancer patients with efficacy analyses pre-specified in populations defined by deficiencies in BRCA and other DNA repair genes which we have named ARIEL3 by the end of this year. We will provide an update from the Phase I monotherapy study at the European Cancer Congress 2013 in Amsterdam what has been accepted as a poster presentation on Sunday September 29.

Now let me turn the call over to Erle to discuss second quarter 2013 financial results and guidance for the year.

Erle Mast

Thanks, Scott. Good morning everyone. Our full financial results are in this morning’s press release so I'll just direct my comments to the financial highlights for the second quarter. We reported a loss of $19.3 million or $0.72 a share for the second quarter of 2013. The net loss for the first half of the year was $35 million or $1.33 per share. Research and development expense totaled $15.8 million for the second quarter of 2013 and $27.9 million for the first half of the year. R&D expenses for the second quarter of 2013 increased by $3.7 million over the first quarter of 2013. Now this increase was due primarily to expanded development activities for rucaparib most notably start-up expenses incurred for the ARIEL2 and ARIEL3 studies as well as milestone payment made for an ongoing investigator sponsored clinical study.

R&D expenses for the second quarter of 2013 also increased over the second quarter of 2012 by $3 million due to development activities for CO-1686 and rucaparib as well as the initiation of the cKIT inhibitor discovery collaboration that we announced and commenced last July.

These increases were partially offset by wind down of development activities for CO-101 which began late last year. Finally our total operating expenses for the second quarter of 2013 included $2.1 million of share-based compensation expense and 3.9 million for the first half of 2013. Our cash burn from operations for the first half of 2013 totaled $32.3 million and we expect cash burn for the full year to be approximately $65 million.

As of June 30th we have $372.2 million in cash and investment and 30.2 million outstanding shares of our common stock. Quarter-end cash balance was like $259 million in net proceeds we received from the sale of common stock that we completed in June and we expect to end 2013 would approximately $340 million in cash.

And with that I will turn the call back to Pat for some closing comment and we will open it up for Q&A.

Patrick Mahaffy

All right let me talk about our anticipated milestone for the second half of 2013. For 1686 first we plan to transition for the tablet formulation of 1686 later this month and continue and ultimately complete the dose escalation for some of the ongoing Phase I/II trials to establish the optimal dosing schedule before the end of the year. We expect to initiate the Phase II expansion cohort to assess efficacy in second line T790M positive non-small cell lung cancer patients in late 2013 and in first-line non-small cell lung cancer patients in early 2014. And overall the intent to advance the clinical program in order to initiate a registration study in second line T790M positive patients in the second half of 2014.

Turning now to rucaparib before the end of the year we commence enrolment of the Phase II biomarker study, ARIEL2 and a pivotal Phase III study ARIEL3 in platinum sensitive ovarian cancer patients. Lastly for our cKIT inhibitor program with Array we intend to identify product candidate by the end of this year or during the early part of 2014.

In closing we are pleased with the results to-date for both compounds and look forward to continuing to advance the clinical development programs and providing updates on these studies underway later this fall.

With that thanks for joining us and we will now open up the call for any questions you may have.

Question-and-Answer Session

Operator

Thank you. (Operator Instructions). This is from the line of Charles Duncan of Piper Jaffray. Please go ahead sir.

Charles Duncan - Piper Jaffray

Hi guys, thanks for taking my question and congratulations on good progress in the quarter. First question is what is the status of the patient that had stable disease that was reported at ASCO, any progress in their disease?

Patrick Mahaffy

That patient still has stable disease.

Charles Duncan - Piper Jaffray

And then can you update us on breakthrough standards, it’s not entirely clear to everyone how that is sought and granted, is that generally after Phase II data or could you see that before on 1686?

Patrick Mahaffy

It’s not actually generally clear to anybody, so it’s not unique to investors. On breakthrough status, I have said this publicly before, and I know it’s on the minds of investors. It wouldn’t change anything we are doing right now, and one of the things that (inaudible) said at the meeting at ASCO on the Wednesday before ASCO is they have seen companies requested too early and they have been told no. We will have a meeting with the FDA. We anticipate sometime in the fall. We will discuss with them breakthrough status, process to apply, and what we have anticipated is when we have a little more data including on these patients that we have enrolled beyond the first six at 900 milligrams twice daily, we will probably be in a position to apply for that status. So we haven't applied yet, we will intend to. I would anticipate that would be as early as before the end of this year. I will obviously keep you updated on the progress of that.

Charles Duncan - Piper Jaffray

Okay and my final question is on rucaparib. I am wondering if you could differentiate your approach relative to others who may be studying germ-line BRCA mutations and compare that to your HRD deficient tumor approach. I am wondering if that has an impact on timelines, potential competitive positioning, and regulatory outlook?

Patrick Mahaffy

Well, I'll try. It’s hard to know what everybody's timelines ultimately will be, but I will state it like this. Our understanding is after it is being tested in the first line setting, limited to patients with germ-line mutations in BRCA, we also know that Tesaro is testing their compound both in maintenance setting that is in patients who have shown benefit from platinum-based therapy. In patients either who have germ-line mutations of BRCA or in the fuller context patients who have shown a benefit from platinum responsiveness. So, they are either looking uniquely at germ-line mutations of BRCA where all of us believe these all of these PARP inhibitor should provide benefit, but also looking at a broad population of them who have benefited from the platinum, we believe that our study in the end is going to be that sort of Goldilocks study that looks of course at women with mutations of BRCA, but because we are using a tissue based assay, we will be able to look at both germ-line and somatic mutations of BRCA simultaneously, and that allows us to look at a population that is inclusive of the 15% of women with ovarian cancer who have germ-line BRCA mutation, but also that other 7% or 8% of women who have somatic mutations of BRCA.

So our first look will be in a population of around 23% of women with ovarian cancer as opposed to 15%. We are the only ones to our knowledge that are looking at a pre-specified group of patients that number another about 25% of women who have mutations of other genes associated with DNA repair deficiency. So, these patients should behave, and the early evidence from the study reported at ASCO for competitive compounds that they do behave similarly to women with BRCA mutations, and so our hope is that by looking at BRCA specifically, 23% or so and then BRCAness as a step-down analysis, we will be able to direct our drug to those patients with BRCA or BRCAness. We all what I think agree are most likely to benefit from a PARP inhibitor.

Now, if in fact it is true that for reasons that we can't describe biologically just because you respond to a PARP inhibitor or platinum, you are going to respond equally well to a PARP inhibitor, that's also included in our analysis. So, we will also be looking finely at just platinum responsiveness as a third step-down analysis. What we believe is that the driver of the responsiveness in patients with who respond to a platinum is in fact those patients who have either mutation of BRCA or other genes associated with DNA repair deficiency.

So, we think ours is a topical design and allows us to direct our drug to patients most likely to benefit from it. In terms of timelines, you know one could suggest or predict that (inaudible) AstraZeneca would be first because they are looking uniquely at these women with germ-line mutations of BRCA. That probably isn't quite true, because they are looking at a first line setting. One could predict that the time to achieve progression free survival is going to be quite lengthy. So, it's hard to predict exactly when – there’s not a lot of (inaudible) in this patient population being exported to PARP inhibitor. So we don't know how long that progression free survival period will be, but it may be that because they are looking at the first line settings, that all of our date will emerge in a relatively similar timeframe, relatively similar.

Charles Duncan - Piper Jaffray

Thanks for the added color.

Patrick Mahaffy

Sure.

Operator

Thank you. The next question is from the line of Ravi Mehrotra of Credit Suisse. Please go ahead, sir.

Ravi Mehrotra - Credit Suisse

Hi, good morning guys, thank you for taking my question. All on 1686, first can you remind us about the trial setup with the hydrogen bromide formulation specifically.

Patrick Mahaffy

Ravi, you got to get closer to your phone.

Ravi Mehrotra - Credit Suisse

Okay, let me pick up my handset, is that better?

Patrick Mahaffy

Yes.

Ravi Mehrotra - Credit Suisse

Okay, all my questions are on 1686. Number one, can you remind us about the trial setup for the hydrogen bromide formulation, specifically the gating points for step up of those open above he 500 that you talked about, is this initial. Secondly, can you tell us of the sort of calendar cut-off for the data that you are going to present at World Lung? And thirdly, can you remind us of the primary and secondary endpoints of the Phase II studies that you talked about?

Patrick Mahaffy

Okay. Andrew, do you want to talk about the dose and dose escalation for the hydrobromide salt.

Andrew Allen

Just to say, Ravi that it is a CRN design, so that is a continuous reassessment method. So, there is dose escalation which is a little bit more adaptive than a standard 3+3 design without the structure of the remaining Phase I component of the program.

Patrick Mahaffy

As to the date, is that okay Ravi?

Ravi Mehrotra - Credit Suisse

Yeah.

Patrick Mahaffy

Okay. As for the calendar date, the cut-off if you will for the World Lung data, it's going to be sometime in October. I would imagine we'll need to prepare those posters and be ready to present, you know, kind of mid October, October 15, 16, 17, for ASCO. For ASCO, we scrambled to get that PR into the posters, so we had shown an ability to move quickly here, but I would assume it's on the order of 15th or so of October.

Ravi Mehrotra - Credit Suisse

Okay.

Patrick Mahaffy

And in terms of the primary and secondary endpoints in the Phase II studies, just to make sure I understand which studies you mean, do you mean the expansion cohorts, the Phase II portion of ongoing Phase I/II or do you mean in a registration study?

Ravi Mehrotra - Credit Suisse

In the registration study, sorry.

Patrick Mahaffy

Okay, so all of you know that there is uncertainty in what that Phase II design will be until we exactly, --until two things happen, we know what the response rate is from the ongoing Phase I/II study we are doing, and secondly through until we have an interaction with FDA. What we believe is that Pfizer and crizotinib have laid out a very credible and predictable path for 1686 that in the event we show an encouraging response rate in the continuing study of 1686 in T790M positive patients including in the expansion cohort. And by encouraging, I think that if it is a third of patients, 33% or more show a response rate or response that is highly likely that we will be able to conduct a single arm study that is 1686 only, with response as the end point.

And the end of that study again to be determined in discussion with the FDA, we would believe to be again depending on what the response rate is, the higher the response rate the lower the end. But some number that it would be on the order of 150 to maybe as many as 200 patients. That patient population, that study would enroll very, very rapidly. So we believe it's response. In the event that response rate is lower than we would like, this is my prediction, it is an answer to your question, and we had to do a head-to-head against chemotherapy, primary endpoint we think would be progression free survival, the secondary endpoint of overall survival. But that too would require dialogue with FDA.

Ravi Mehrotra - Credit Suisse

Understood, thank you, I’ll leave you to take questions.

Patrick Mahaffy

Okay.

Operator

Thank you, the next question is from the line of Peter Lawson of Mizuho Securities, USA, please go ahead, sir.

Peter Lawson - Mizuho Securities, USA

Patrick, I may have missed something, jumping in between calls, but -- for the cap rate, there was a slight --

Patrick Mahaffy

I can do this, maybe -- can you get closer to your mic, am I getting old, this is disastrous.

Peter Lawson - Mizuho Securities, USA

It is really quiet. So still recovered, there was a slight delay from the second half to -- basically pushed out to the end of the second half, the Phase II biomarker study the ARIEL2. What caused that delay?

Patrick Mahaffy

Well, we hadn’t sent a note. In fact, you know, we couldn’t know exactly when we sent a note. We’re only just literally now have established the dose that has to get dropped in the protocols, and so when that will be, approvals are just based on this dose, we’ll be in a position to initiate that study.

Andrew Allen

It’s not the end of the second half ARIEL2 just to be clear.

Peter Lawson - Mizuho Securities, USA

But you’ve moved it to 4Q.

Andrew Allen

The first patient into that study will be -- I’m not entirely sure at this point, but it’ll be the September-October right on the class with three to four.

Peter Lawson - Mizuho Securities, USA

Got you. Okay. Thank you. And then the Supreme Court decision around BRCA gene patens uphold in the CDNA overturn in the isolated gene patents. Is that in any way changed your outlook on the use of a companion diagnostic or your partner over there approached there.

Patrick Mahaffy

No.

Peter Lawson - Mizuho Securities, USA

And I guess around the clinical evidence surrounding platinum sensitive patients, does that change to, in any way invalidated the use of a diagnostic?

Patrick Mahaffy

No. Andrew, go ahead.

Andrew Allen

The one thing that we’ve learnt that's very important in the last few months was the retrospect analysis of Jonathan Ledermann's Switch Maintenance study in a high grade serous ovarian cancer with AstraZeneca PARP inhibitor olaparib. And they did a retrospective analysis of the 265 patients that were in that trial, originally selected just on clinical grounds have been platinum sensitive on a repeated basis. But they went back and obtained blood and tissue from the majority of the patients, and therefore were able to analyze the data based on whether the patients with germ-line BRCA and even somatic BRCA mutant or BRCA wild type. And they showed two important things which really were consistent with the assumptions we had made to inform our program.

The first observation was that germ-line and somatic BRCA mutant patients had exactly the same benefit from PARP inhibitor therapy and has a ratio in the retrospective analysis of 0.18 for the blended group and it really didn't matter whether you were germ-line or somatic. Hence, the utility, the tissue bracket test is that you collect both of those patients, and don’t rely just on germ-line which misses and these are about a third of the patients.

The second observation is really important, with that in patients who had wild type BRCA genes, the hazard ratio of PARP inhibitor therapy in that trial was 0.53, which is obviously very respectable efficacy metric. And I believe is that, that really comprises two populations of patients. One group who can probably get like little benefit from PARP and one group who can get pretty substantial benefit from PARP with the hazard ratio of maybe 0.3 or 0.4. And obviously, our program is aimed at dissecting out those two populations and delivering a clinical pivotal trial that will show how to separate them using a validated compelling diagnostic, and obviously we believe that, that will lead potentially to a very good quality label and will really help physicians and patients understand who should get PARP therapy and who should not get PARP therapy.

So those I think are the key insights for the informed program really somewhat unaffected by the Supreme Court decision on Myriad.

Peter Lawson - Mizuho Securities, USA

Got you, thank you. Did you mention the incidence rate for the BRCAness?

Andrew Allen

Well, it’s not been defined very robustly because obviously the key question is, who responds to PARP inhibitor. There are all kinds of assertions you can read in the literature, where people will make statements about BRCAness, but what we care about is who responds to PARP inhibitor. And obviously, you need a clinical trial of patients who receive PARP inhibitors, where you had our outcomes, and you have genetics, and you can correlate the two. That’s really the only way to sensibly and convincingly answer your question. And obviously that is precisely the question that we’re asking and answering in our ARIEL2 biomarker study. And the results of that, as you know, will be used to inform the final analysis, the efficacy analysis of our ARIEL3 pivotal study.

So what we can tell you is that based on the TCGA data, the academics that analyzed those patients with high grade serous ovarian cancer believed that 51% of their patients with high grade serous ovarian cancer patients exhibited BRCA or BRCAness if you like the term they would use in the paper was homologous recombination deficiency the same thing. So that figure 51%, but that’s largely based on in silica analysis and as I said we really don't know whether that’s a reverse number for PARP inhibitor sensitivity, whether it’s too big or too small or just right, we will find out.

Peter Lawson - Mizuho Securities, USA

Got it, thanks you so much for the color.

Andrew Allen

Sure

Operator

Thank you. Next question is from Cory Kasimov from JP Morgan. Please go ahead.

Unidentified Analyst

Hi this Whitney on for Corey this morning. Can you hear me okay?

Patrick Mahaffy

Yes.

Unidentified Analyst

Excellent, all right. So first question I am wondering for the 1686 dose is the 500 mig BID kind of equivalent to the 900 mig BID capsule or is that kind of a step-up in dose?

Patrick Mahaffy

It’s a full analysis from looking at exposures in a number of things, but it was informed by both the 900 milligram dose but also by the fact that we cleared 900 milligram BID and could have gone to 1350 BID for the free base, but chose not to so it’s a hybrid.

Unidentified Analyst

Okay. And then I know you haven’t said which one will you think will emerge as DLT but can you talk about some of things you're starting to see that might be candidates?

Patrick Mahaffy

No, no.

Unidentified Analyst

Okay.

Patrick Mahaffy

I am not going to speculate on what could emerge. I know something will, but it just -- it really is too early to know what it will be.

Unidentified Analyst

Okay. And then last question, will you guys wait to see data from the new formulation before kind of really forming your registrational plan or would you feel comfortable making those decisions based on the capsule formulation data?

Patrick Mahaffy

Depending on what we see, we'll pick up the formulation with 900 mig BID. That could provide a lot of input in our analysis in our decision making as it relates to the registration setting.

Unidentified Analyst

Great. Thanks for taking the questions.

Patrick Mahaffy

Sure.

Operator

Thank you. (Operator Instructions). And our next question comes from the line of Marko Kozul of Leerink Swann. Please go ahead.

Marko Kozul - Leerink Swann

Hey good morning and congrats on your progress. My friend Ravi already took all my good questions. So I will start with this one. Can you give us your view on heterogeneity patients that can drive progression in the refractory non-small cell setting? And more specifically can a patient have T790M positive mutation status that still have another mutation that’s driving progression of their disease and might show tumor aggression even if the drug is a non-T790M specific drug that might work through another pathway? And if this does occur, do you have any sense of how frequent or infrequent this could be?

Patrick Mahaffy

Andrew?

Andrew Allen

Obviously a good question Marko, and in essence we don’t have an answer and no one has an answer to this issue of degree of heterogeneity and derive all this heterogeneity because to answer the question requires multiple site biopsies in a patient with acquired resistance. It’s hard enough to be honest to get a single site biopsy in a lung cancer patient with acquired resistance. Nobody yet has started to give multiple sites. I think that will happen over time and I think the growing utility of blood based molecular testing will actually help inform the answer to your question where we will start to see if a patient does carry multiple potential drivers of acquired resistance that can measured and monitored in the blood, I think that will give us an indirect answers. Although of course it won’t be specific to a lesion that is visibly growing or visibly shrinking or visibly static which I guess it will be really be in order to be able to answer your question well.

I think operationally what we will do is to treat our patients if and when they progress we will try to get biopsies that obviously written in our protocols. Those will then be analyzed at the molecular level, we don’t know what the drivers of resistance, acquired resistance for this maybe in humans yet although we hope we will be presenting some data at a scientific meeting later this year we've got some early in vitro work will be done. But we will collect biopsies and analyze them and we will need to analyze them quite broadly because again we don’t know what we expect, we have to look cast a pretty wide net and see what we see. And on the development inform the way we analyze other patients even in their tissue or in their blood and slowly we will build a dataset, people start tell us about drivers of resistance and heterogeneity resistance as well.

Marko Kozul - Leerink Swann

Terrific, I appreciate that response. I have a few more. Is there any pattern emerging in terms of speed, magnitude and duration of patients responses to 1686 that drives or supports the hypothesis that you are clearly shutting down conclusively a specific and important pathway at least for the T790M patients?

Patrick Mahaffy

Too it’s too early as part one of your question to respond to that. We don't otherwise you know end yet to respond to that. I think that we have conclusively shown and to the satisfaction of the scientific community by shutting down T790M dose we are shutting down tumor growth. And in fact through all of the evidence presented at ASCO, evidence that T790M is a driver mutation and 1686 shuts it down when delivered at high enough dose.

Marko Kozul - Leerink Swann

Great. A couple on potential 1686 follow on compound. Can you discuss your maybe some of the most likely 1686 escape or resistance mechanisms?

Patrick Mahaffy

No. You knew I wasn't going to tell you Marko.

Marko Kozul - Leerink Swann

Are you still on track to announce potential candidate by year-end?

Patrick Mahaffy

A potential candidate --

Marko Kozul - Leerink Swann

A follow-on candidate to 1686, yeah.

Patrick Mahaffy

We've never intended to announce the follow-on candidate for 1686. We publicly said that we hope to have a candidate identified in cKIT in our collaboration with Array, but we’ve never talked about a follow-on to 1686. Andrew stated earlier that we may say by the end of this year or early next year what we believe in this experiments have shown is to be the resistance mechanism to 1686 but nothing about a follow on here.

Marko Kozul - Leerink Swann

And since we mentioned cKIT are your efforts here primarily focused on developing the target that can overcome the D816V mutations. And can you discuss while other drugs to-date have been ineffective here and partially what overcoming this resistance would imply but advancing potential candidate up the treatment paradigm for GIST and potential for treating another activating loop mutations?

Patrick Mahaffy

Andrew?

Andrew Allen

So the goal is to develop an inhibitor of acquired resistance mutations in cKIT which appear to be predominantly overwhelming driver of acquired resistance in GIST to all of the currently available therapies which included as you know imatinib, sunitinib and now Regorafenib. D816V is an important resistance mutant, it’s not the only one and that’s why we are developing a drug which will inhibit D816V but it will also inhibit some another important resistance mutations. And obviously we’ll be able to disclose more data on that topic at the time that, it's going to be a while because we don’t yet have a nominated clinical candidate.

Marko Kozul - Leerink Swann

Sure. And just looking a little further ahead beyond early Phase I studies with this candidate that would be looking at safety, can you give us any early preview on how focused subsequent clinical trials and development would be for such candidate.

Patrick Mahaffy

It’s a little early for that yet Marko, I think we got a lot to learn about the countdown first. So its -- let’s answer that in a year or so.

Marko Kozul - Leerink Swann

Terrific. And just one here on 1686 and frontline, when do you think you might be ready to give us your deep reviews on what the frontline opportunity for 1686 might look like?

Patrick Mahaffy

Well the frontline opportunity is evident in terms of the market size and the market potential, if you mean or are you more specifically asking when do we think will have data from the expansion cohort?

Marko Kozul - Leerink Swann

I was just thinking broadly in terms of the overall market opportunity in terms of characterizing what the frontline might represent in addition to refractory T790M?

Patrick Mahaffy

Well just numerically around 30,000 patients every year in the United States are going to get lung cancer that is driven by activating mutations of EGFR. So the annual incidence that we directing that against would be around 30,000 in the United States, you all are aware that today half of the 60% of patients or so, 64% is the number that is being used most widely are actually tested for those mutations to the EGFR. So there is still some efforts to go in educating the clinical community particularly in the community setting about the benefits of testing for EGFR and directing appropriate therapy. The good news is for us is that effort is underway aggressively now by both Boehringer Ingelheim for Afatinib and by -- or will be shortly and by Genentech for Tarceva, both of which have recently received post filing labels.

So we anticipate that the testing will grow and by the time we will be in a position to compete head to head against one of those compounds hopefully with a successful outcome and we would be closer and closer to that 30,000 available patients annually. The numbers are similar in Europe in terms of the percentage of the population because it's a larger number that is a larger number, and as you are all well aware I think Asians unlike this 15% of patients of lung cancer being given EGFR, that number is always reported to be 30% or 35%. So Asian opportunities is quite large on a relative basis.

Marko Kozul - Leerink Swann

Appreciate that. Just one quick last one I promise and then I will jump back in queue. Is there any material consensus amongst [kinase inhibitors] or in terms of what a minimum PSS benchmark might be for the component in the frontline setting. Thanks.

Patrick Mahaffy

Yeah, it's a good question. So you know that the progression free survival has been reported for Tarceva and Afatinib are around the order of 10 to 11 months, so pretty similar numbers 10.5, 11.5 or so the numbers you see when looking at the whole complete population of mutations to EGFR. We think we are going to have a tolerability advantage that is really meaningful versus both of these compounds, so that in itself is valuable. But we also know that in oncology what always matters the most is sort of by an order of magnitude is efficacy. So we think that if we showed in our single arm study, a progression free survival of something in the order of 13 to 14 months we’d be okay, and would actively consider going ahead with the head to head study. But I’m not certain that that’s enough. I do think that if we got more to 14 or 15 months and certainly we would be optimistic about the potential head to head against one of those agents, anything above 15 months would be very, very encouraging to us. So that is the kind of range I would tell you. If it was 12 months or less our hypothesis I think is well and I would be surprised that we would be consider doing a head to head against one of those compounds. I have been asked about would we run a non-inferiority study, I don't think so, it is hard to -- I am sure what the advantage would be and that's why we really believe that the tolerability advantage is so profound.

Marko Kozul - Leerink Swann

Appreciate you taking the questions, thank you.

Patrick Mahaffy

Sure.

Operator

Thank you sir, we have no more questions in the queue. With this I would like to turn the call back to Ms. Anna Sussman for closing remarks.

Anna Sussman

Thank you. We thank all of you for your interest in Clovis Oncology today. If you have any further questions please contact me at 303655022. This call will be accessed via a replay of our webcast at our website beginning in about an hour and will be available for 30 days. Again we appreciate your interest, thank you have a good day.

Operator

Thank you, ladies and gentlemen, for your participation in today’s conference call. You may now disconnect and have a great day. Thank you.

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