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Clovis Oncology, Inc. (NASDAQ:CLVS)

Acquisition of EOS to Gain Lucitanib Rights (Transcript)

November 20, 2013 08:30 AM ET

Executives

Breanna Burkart - Investor Relations

Patrick Mahaffy - President and CEO

Erle Mast - Chief Financial Officer

Andrew Allen - Chief Medical Officer

Analysts

Cory Kasimov - JPMorgan

Charles Duncan - Piper Jaffray

Yaron Werber - Citi

Brian Klein - Stifel

Peter Lawson - Mizuho Securities

Ravi Mehrotra - Credit Suisse

Marko Kozul - Leerink Swann

Operator

Good day, ladies and gentlemen, and welcome to the Clovis Oncology to discuss acquisition of EOS to Gain Lucitanib Rights Conference Call. My name is Matthew and I will be your operator for today. At this time all participants are in 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.

And now I would like to turn the call over to Breanna Burkart. Please proceed, ma’am.

Breanna Burkart

Thank you, Matthew. Good morning and welcome to the Clovis Oncology conference call to discuss our acquisition of Ethical Oncology Science or EOS, a privately held Italian company developing a novel targeted therapy to treat cancer. You should have received press release announcing this transaction. If not, it is available on our website at www.clovisoncology.com.

We will also be reviewing a slide presentation as part of the call today. It is also available on our website in the Investors and News section under the Webcasts and Presentations link. As a reminder, this conference call is being recorded and webcast. Remarks maybe accessed live on our website during the call and will be available on archive for the next several weeks.

The agenda for today’s call is as follows. Patrick Mahaffy, Clovis’ President and CEO will provide an overview of our acquisition of EOS and what it means for Clovis. Then Erle Mast, Clovis’ Chief Financial Officer will describe the financial terms in more detail. Dr. Andrew Allen, our Chief Medical Officer will introduce lucitanib with an accompanying slide presentation available on our website. Patrick will make some closing comments and then we will open the call for Q&A.

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 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

Great, thank you Breanna, welcome everybody. We're pleased to announce yesterday our acquisition with EOS to gain the rights to lucitanib an oral, dual-selective inhibitor with tyrosine kinase activity of fibroblast growth factor receptors 1 and 2 or FGFR 1 and 2 and vascular endothelial growth factor VEGF receptors 1, 2, 3.

With this acquisition we gained exclusive global rights, excluding China to develop and commercialize lucitanib. Previously EOS sublicensed European and the other rest-of-world, outside of China, rights to Servier and we will now collaborate with Servier on the global clinical development of lucitanib. Importantly we maintained development and commercial rights to lucitanib in the United States and Japan. We will of course as well receive development regulatory and commercial milestone from Servier as well as royalties from their sales in their territories.

Importantly and as Erle will describe in detail, Servier has also committed to fund the initial €80 million or approximately $110 million of the global research and development budget for lucitanib. As a result the addition of lucitanib to our portfolio will have only a modest impact on our R&D spend over the next three years or so.

As you’re all aware we've had an active ongoing effort to acquire an additional asset consistent with our focus on target specific compounds that can provide meaningful benefit to a patient population which can be identified with the companion diagnostic. In particular, we have been aware of lucitanib for at least two years, one of which first described to us by Professor Jean-Charles Soria who in addition to be an investigator for CO-1686 is one of the first clinicians to participate in the initial Phase 1 study for lucitanib. He was then and remained exceptionally enthusiastic about lucitanib as we were introduced to the drug and got closer to the drug, we began to share his enthusiasm.

As ever in these processes, it took us a while to get from that enthusiasm to today’s announcement but it has also allowed us to spend two years watching development of the drug and the consistent enduring benefit it provides to many patients for the FGFR1 tumors in particular in patients with breast cancer. It also allowed us to understand why lucitanib appears to have such profound activity in the patient population where other FGF inhibitors have not demonstrated similar efficacy. FGFs and VEGFs all play a role in tumor growth in angiogenesis and both are validated targets in oncology.

We believe the uniqueness of lucitanib lies in its ability to inhibit both FGFR and VEGFR tyrosine kinases in patients. Specifically we believe that FGF-aberrant tumors are driven by both FGF and VEGF pathways and thereby inhibiting both as it does, lucitanib can offer more meaningful benefits in single pathway inhibitors. But we offer more tangible evidence of the drug’s activity. We are extremely encouraged with the 50% response rate seen to-date in heavily pre-treated FGF-aberrant breast cancer patients as well as the objective responses in other tumor types sensitive to angiogenesis inhibitors like renal cells and thyroid cancer that the drug had exhibited. We also believe that lucitanib has significant potential in the up to 35% of patients with squamous non-cell lung cancer who have FGF-aberrant tumors.

Andrew will provide some additional clinical details in his comments, but I will provide just a quick overview now. FGF-aberrations include amplification with FGFR1, as well as amplification of a region of chromosome 11q that contains several FGF ligands, specifically FGF3, 4 and 19. Our initial development program for lucitanib will focus on the approximately 25% of women with breast cancer who have FGF-aberrant disease defined in this way.

Lucitanib and our associated development plan are both highly consistent with our focus on developing targeted therapies that provides significant benefit for specific patient populations. It becomes really good at developing targeted therapies for patients selected with molecular diagnostics including next-gen sequencing. And we believe that this further differentiates our company as a 21st century oncology drug developer and we are extremely enthusiastic about the potential lucitanib has for patients with FGF-aberrant tumors.

Now I will turn the call over to Erle to discuss the terms of the deal and then Andrew to discuss the clinical background and development plans for lucitanib.

Erle Mast

Thanks, Pat. Good morning, everyone. Let me take a few minutes to detail the financial terms of the deal. So we acquired EOS for an upfront payment totaling $200 million which included $100 million in Clovis common stock or approximately 3.7 million shares and $10 million in cash. We will pay an additional $65 million in cash to EOS shareholders upon the first NDA approval of lucitanib by the FDA.

Now as Pat mentioned EOS had previously sub-licensed European and rest of the world rights for lucitanib to Servier. And in accordance with this license agreement, we are eligible to receive upto €350 million which is approximately $470 million upon the achievement of development regulatory and commercial milestones as well as royalties on lucitanib sales in Servier territories.

At any event that we receive certain of the regulatory and commercial milestones from Servier upto an additional €150 million of those payments or approximately $155 million will be passed through to EOS shareholders. Now another benefit of the license agreement with Servier is Servier's commitment to fund the global development of lucitanib. We will collaborate with Servier on the development of lucitanib through mutually agreed upon global development plan and as part of this collaboration Servier is responsible for the initial €80 million or approximately $110 million of global development plan costs for lucitanib. Any global development costs above €80 million will be shared equally between Clovis and Servier. Based on this arrangement, we anticipate that the majority of lucitanib development costs for the next two to three years will be covered by Servier. And as such, we expect that the addition of lucitanib to our portfolio will not have a material impact on our R&D expenditures during this period.

And with that, I will turn the call over to Andrew who will present a more detailed overview of lucitanib.

Andrew Allen

Thanks very much, Erle. So now I'd like to direct your attention to the lucitanib slides, which are available on our website and at the outset of the call. And if you have an access to presentation, please see [now]. And again to remind you it's available in the Investors and News section of our website under the Webcasts and Presentations link right at the top.

So, let me jump into page four of the presentation, we'll skip over the executive summary. So lucitanib is a unique FGF receptor antagonist which has dual activity for FGF receptors 1 and 2 and for the family of VEGF receptors 1, 2, 3, and in the in-vitro assays with IC50 less than a 100 nM in cell based assays, no other meaningful inhibition of wild-type kinases. And obviously this is a high level statement, but fibroblast growth factors and their receptors are tumor growth promoters and also proangiogenic agent which also regulate a wide range of processes in the body. And we know the genetic alterations in the FGF pathway including gene amplification both for the receptor and the ligand as well as the mutations receptors, activate mutations are frequently observed as driving events in cancer. Furthermore vascular endothelial growth factors or VEGFs and the receptors also promote tumor growth and of course they are well validated target oncology and this dual selected targeting by lucitanib that leads to the very attractive efficacy profile that has led us to acquire this asset.

On slide five, you can see again brief summary of the in-vitro data that as you would expect lucitanib selectively inhibits cell lines driven by FGF and FGF-receptor biology, the preferential inhibition of FGFR1 gene amplified lung cancer cell lines for example. And there is a broad set of in-vivo studies that [EFs] have carried and the drug lucitanib displays a broad anti-tumor profile consistent with its VEGF and FGF activities.

On this page we just show a couple of models, on the left is a breast cancer xenograft with the well studied MDA-MB-231 cell line showing activity of the drug lucitanib superior in this case to sorafenib as well as chemotherapy agent 5-FU. And on the right in a more targeted model this is an FGFR1 gene amplified lung cancer xenograft model and you can see nice activity of lucitanib in a dose related fashion.

On slide six, we’ve taken a look at The Cancer Genome Atlas or TCGA data set, which is available to the researchers now. And we see many different tumor types have been sequenced by the TCGA organization and are available for public review on the website and we can interrogate that database and look for frequency of amplification of FGF receptor 1 and amplification of this 11q amplicon that Pat referred to that is the commonly seen in cancer and contains typically three members of the FGF ligand family FGF-3, -4 and -19. And on this table you can see that amplifications of FGF receptor 1 is most frequently seeing in squamous carcinoma of the lung, is also found commonly in about 10% of invasive breast cancers as well as in a variety of other solid tumor types and then you add in the 11q amplicon you can see those numbers increase further still.

On page seven we take a slightly deeper dive into breast cancer. And here of course we're looking at breast cancer to the typically clinical prism of whether the breast tumors express the estrogen receptor, the Her-2 receptor for other [circled] triple negative breast cancers. And most breast cancers are ER-positive, estrogen receptor positive. And FGF receptor amplification and 11q amplification is commonly seen in the ER-positive population. And given the overall frequency of the ER-positive it’s not a surprise therefore that the most common group of patients who have the FGF aberrations of those who are ER positive. So from a pivotal trial point of view, one needs to be thinking about the drug in the context of the treatment of ER-positive breast cancer. FGF aberrations are also seen in Her-2 amplified patients but are relatively rare in triple negative breast cancer.

On page eight there is a simplified scheme describing the Phase 1/2 study that EOS has been running over the last couple of years and it’s worth noting that the two dominant investigators in this study are the two very experienced investigators in Europe, Jean-Charles Soria from Institut Gustave Roussy in Paris and Josep Tabernero, who’s at Vall d’Hebron in Barcelona, both very seasoned Phase 1 investigators. And as Pat mentioned their enthusiasm for this asset is what has led us to this acquisition.

The study begins as simple Phase 1 dose escalation with continuous daily dosing and they went up to 30 milligrams QD and identified 20 milligrams as the maximum tolerated dose. It is notable that dose reductions were relatively common after several months on 20 milligrams, they explained the 50 milligram dosing that is being used now by Servier in one of the Phase 2 trials that they have just started. Intermittent dosing has been explored but there is no very clear benefit of the QD dosing. And the Phase 2 expansions both in FGF-aberrant tumors as well as in tumors that we called angiogenesis sensitive meaning these tumor types commonly expected the benefit from angiogenesis inhibitors or patients who had clearly themselves benefitted from prior anti-angiogenic therapy. The focus for us is the FGF-aberrant population. And in that group there were 16 breast cancer patients, of whom 12 were evaluable. And those patients are in the waterfall that I will come to you shortly.

On page nine, you can see the drug related adverse events were mostly mild in severity, the most common are associated with VEGF receptor inhibition. And there is no doubt that this molecule lucitanib is a very potent clinical VEGF receptor inhibitor. And I expect it was clinical because the IC50s can be misleading and there are certain drugs that look in IC50 assay by chemical assay as though they will be VEGF inhibitors in the clinic, but when patients are treated there was not much hypertension or no hypertension.

And that’s a very strong pharmacogenomic signal that the drugging question is actually not inhibiting the VEGF receptor. And one of the relevant potential competitors to this molecule is the drug dovitinib or TKI258 which on paper looks somewhat similar to lucitanib at an IC50 level. But when you treat patients with dovitinib there is essentially no hypertension, clearly it is not fitting the VEGF receptors in the clinic. So I emphasize the importance of clinical data when you are trying to understand the real profile of the drugging question.

Here you can see that hypertension was most common adverse event, this of course is now very common in clinical practice given the frequency of use to VEGF inhibitors and clinicians are very experienced of managing this with standard antihypertensive medication, it is typically asymptomatic and is a toxicity, that’s managed on intermittent clinic digits with no symptomatology of relevance to the patients. So this is not a troublesome toxicity in terms of discontinuations.

Proteinuria is also relatively common, again further pharmacogenomic evidence in VEGF inhibition. And again this is easily managed by dipstick testing and drug holiday when proteinuria mounts and then restart similar dose with successful use in the clinical study to-date. This is why so many patients have been on the long period of time. The other adverse events are relatively common with VEGF inhibitors and again these are low grade and easy to manage high profiles in the typically sub-clinical and easy managed with dialogues and supplementations.

So on slide 10 we are looking at the efficacy side of the equation, we can see the waterfall here for the FGF-aberrant breast cancer patients in the Phase 2 expansion and these are the very heavily pre-treated patients nonetheless we see a 50% objective response rate and really only one patient exhibiting progressive disease is the best response. The medium PFS for this population was an impressive 9.4 months and there is something of a benchmark we can look at the recent study with Regulin, it was approved in the late stage breast cancer context where the medium PFS is between three and four months as a meaningful benchmark.

All of these patients were FGF-aberrant and that was defined as you can see in these figures either R1 amplified or 11q amplified and you can see activity in both of those genetic groups in this waterfall chart.

Slide 11 gives a little bit more color to these same patients. Here we have listed a number of previous treatment lines and you can see that the medium number of prior treatments is six, in some patients as high as 14 prior lines of therapy. And interestingly several of these patients have been on clinical studies in Paris and in Barcelona with pure FGF receptor inhibitors of which the leading two are the Novartis drug BJG398 and the AstraZeneca AZD4547. And you can see here on the patients here that several patients have been on those drugs with very little apparent benefit but then benefited meaningfully from lucitanib treatment further emphasizing that this drug is not the same as pure FGF receptor antagonist. There is a VEGFR inhibition activity that is very meaningfully different and appears to lead to a different clinical profile.

Slide 12 shows the waterfall from the expansion cohort in the [circled] angiogenesis sensitive patients. And you can see again many patients derived benefit from lucitanib therapy with five partial responses observed in this study, these rolling patients who have had prior treatment with other anti-angiogenic agents.

In slide 13, how do we find FGF-aberrant tumors, it's very straight forward, in breast cancer in particular where FISH testing, fluorescence in situ hybridization has become standards for Her-2 assessment. And as you might imagine, there are [probe] assessed for FGFR-1 and for the 11q amplicon. And therefore FISH, the standard approach is more than fit for the task of identifying appropriate patients for the Phase 2 and Phase 3 studies.

It's worth mentioning that next-gen sequencing is increasingly being used in academic centers to stratify patients for clinical trials and of course next-gen sequencing readily identifies gene amplification and [copy number] change as well as sometimes mutations in the FGF receptor 4.

So on slide 14 our development plan with Servier focuses in the short term on selected breast cancer and lung cancer patients. Servier has just begun a European Phase 2 study at lucitanib in three cohorts of breast cancer patients. This study is called the FINESSE study. It’s listed on clinicaltrials.gov and is run by the European Academic Consortium, the Breast International Group. There are two PIs, Professor Patrick Andre from Institute Gustave-Roussy who obviously had experience with this drug, as well as Professor Cortes from Vall d’Hebron who also of course have seen the drug in Phase I with Professor Tabernero.

This study will look at the question of which patients should receive lucitanib therapy, is it the FGFR1 amplified, the 11q amplified and is there any activity of this drug completions without FGF-aberrations. There will be up to 41 patients in each of these three cohorts to answer that question.

There is also Clovis sponsored Phase II study that will be probably a global study in FGFR1 or 11q amplified patients in non-small cell lung cancer and the Clovis sponsored US Phase II study of lucitanib in patients with advanced breast cancer who have FGFR1 or 11q amplified disease as well.

So those are three studies that we’ll be starting very shortly. And I just mentioned that there is interest in other patients with FGF-aberrations and there is a longer term plan to look at that through what’s called a [basket] study which we’ll talk about in the future date.

On slide 15, just to summarize the differences between our drug and some of the discrete competition. Here we’re looking at targets and you can see the lucitanib targets, the VEGF receptors 1 and 3 and FGFR1 and 2. And again dovitinib has some commonality on paper and in the second we’ll look at the clinical differences. This is a different drug from the selected FGFR tyrosine kinase inhibitors of which the most advanced two are AZD4547 and BGJ398 from Novartis. These drugs are pure and Pan-FGF receptor inhibitors that inhibit all of the FGF receptors without the VEGF receptor or PDGF receptor inhibition.

The importance of that I think is shown on the next slide, slide 16 which summarizes the clinical data in these different molecules. As we walk through the lucitanib data, dovitinib was studied specifically in 25 women with FGF receptor 1 amplified breast cancer. And there were no confirmed pulse responses, zero, clearly different from lucitanib. There is also essentially no hypertension with dovitinib. It’s not hitting the VEGF receptor in the clinic.

And there is a little bit of activity against the plasma phosphate and plasma phosphate is relevant because if you inhibit all of the FGF receptors then you block kidney phosphate excretion and the plasma phosphate will increase. And that is a well described and class wide toxicity seen with the selective FGF receptor tyrosine kinase inhibitors.

And now if you like that’s the benchmark of pan FGFR inhibition. You don’t see it with lucitanib because we don’t hit all of the receptors. You do see it with AZD4547 and BGJ398. So those drugs are clearly distinct. They have no hypertension which of course is not hitting the VEGF receptor.

And again in selective patients with FGF receptor amplified breast cancer, no responses have been observed. And in patients with lung cancer who have FGFR1-2 amplification, one response has been seen out of 20 in an AstraZeneca study and little bit hard to tick it out of the Novartis abstract, but one out of three patients who are FGFR1 amplified appears to have had a partial response.

As you’re probably aware AstraZeneca appears to be focusing on FGF-aberrant gastric cancer where actual mutations in the FGF receptors are seen and that maybe the basis for that focus. Novartis appears to be pursuing more of a combinatorial strategy with their drug BGJ398.

Finally on slide 17 just to give some sense of the size of the opportunity. As I’ve mentioned, breast cancer and squamous lung cancer are two of the earliest indications of interest to us although not the only two where this drug could work. And I won’t walk through the numbers these are well known to you. But as I’ve shown FGF-aberrations are common in these very common solid tumor types where there is still clearly unmet needs. Unfortunately people are still dying each year from breast cancer and for sure for squamous lung cancer. And this drug may have a role in the treating those patients and we’ll obviously be exploring that in the Phase II and goes as well in Phase III studies in those contexts.

I won’t read the summary to get back over what I’ve discussed, so let me at this point turn back to Patrick for some closing remarks and then we’ll open up for Q&A. Thank you.

Patrick Mahaffy

Thanks Andrew. All right, we’ve been monitoring development of lucitanib for some time and we are very pleased to have added it to our portfolio of targeted therapies. I should also note that we’ve gotten in Servier over the course of our due diligence and negotiations and believe they will be a very good partner for us in the global development of this drug.

One note, we’re planning to hold our R&D Day and Webcast for institutional investors and analysts to detail our clinical development programs on Monday, January 27th in New York City. So look forward to discussing all of our products and their development plans in more detail with you then.

In summary we think we have a unique product portfolio married to a very capable development team. We think we’re in for a very exciting run.

With that, we like to thank you for joining us today and we will open up the call to any questions you have.

Question-and-Answer Session

Operator

Thank you. (Operator Instructions) And your first question comes from the line of Cory Kasimov of JPMorgan. Please proceed.

Cory Kasimov - JPMorgan

Hey, good morning guys. Thank you for taking the questions. I have two of them for you, one clinical and one financial. So first on the clinical, from a safety standpoint you mentioned that most of the adverse events reported were transient in nature or asymptomatic. Can you tell us what percent of patients dropped out of those early studies due to AEs? And then a follow-up question I guess for Erle is when is the lock-up period for EOS shareholders over so they can sell their stock if they want to? Thanks.

Patrick Mahaffy

Yeah. On the clinical question, I can’t give you single-digit because of course multiple doses different regiments have been used, but it’s single-digit.

Cory Kasimov - JPMorgan

It was single-digit percent that dropped out?

Patrick Mahaffy

Yeah.

Cory Kasimov - JPMorgan

For adverse events, okay.

Erle Mast

Okay. Good morning, Cory, it’s Erle. For the EOS shareholders receiving Clovis shares there is not a lock up on those shares. EOS is a privately held Italian firm, it’s inter-capital backed, as well as with some individual shareholders. The primary shareholder for EOS is Sofinnova, well known healthcare venture capital firm. So those shares are obviously with those shareholders. We ended up not doing a lock up. Lock up at some point come off and can create an overhang on stock at that time. And so we are likely to do this negotiation to not put a lock up on these shares.

We certainly can’t speak to what the EOS shareholders would do with their Clovis stock, but they are in the hands of responsible shareholders who will obviously do what’s best for them. But to the extent they look to monetize their shares we would expect they will do that in a manageable fashion.

Cory Kasimov - JPMorgan

Alright thanks. I appreciate it.

Operator

Thank you for your question. The next question comes from the line of Charles Duncan of Piper Jaffray. Please go ahead.

Charles Duncan - Piper Jaffray

Hi, guys. Thanks for taking the question and congrats on the deal. It looks like clearly a swampy way of building out the pipeline. So my first question is perhaps to you, Pat. You said that you have been interested in doing diligent on the drug candidate for some time. But can you help us understand what in particular change with this? Was it the start of the Phase II studies or….?

Patrick Mahaffy

Just to be clear, what changed in allowing us to move forward and doing the acquisition that's what you mean?

Charles Duncan - Piper Jaffray

Yes.

Patrick Mahaffy

Some of it is about us and getting comfortable with the data and seeing a consistent response rate emerge over the course of the expansion cohort and in particular seeing the duration of those responses. We've got a great dialog with the clinical community as you know. And as we did due diligence and spoke not only to the investigators, but those who were planning to participate in subsequent studies, the enthusiasm for this drug is really, really high. We tend to react very clearly to investigator enthusiasm. And so that drove us to continuing great degree of interest in the drug.

We first started an economic dialog with EOS before they entered into their European partnership (inaudible) partnership with Servier. So we've had a dialog with EOS for a long period of time when they entered into that relationship, they kind of pull back from a subsequent conversations about our relationship.

In 2013, they began I think to become interested in getting in a possible US partnership. And for a variety of economic reasons we thought that the better way for us to move forward was actually acquire it. This was a competitive process which we knew it would be there as a lot of interest in new types of therapies, this one in particular. But over the course of this year, we maintained a dialog in relationship with EOS and got to the point where we entered into this transaction.

It's kind of nice when you have a relationship with a company and an ability to react to a drug’s development process for a period of time before you enter into one of these relationships, in our case the permanent one now because it gives you a lot of confidence in the decision you have made.

Charles Duncan - Piper Jaffray

Second question is regarding the potential for an accelerated development path, I guess I can imagine that too kind of looks like the approach that you are taking with 1686. What do you think about that? And then who might you partner for a companion diagnostic development?

Patrick Mahaffy

I think I’m going to punt on the accelerated development, the answer to your question on accelerated development plan; we want to have a detailed dialog with our partners at Servier before we announce anything that would impact on timelines for more accelerated program. We have a series of conversions immediate planning with them. And I think that by the time of our R&D there, at the end of January, we’ll be able to layout specifically what our development plan will and will not include and what it may include pending data, which could include an accelerated approach.

As to who we will interact with on the companion diagnostic side, it would be premature for us to announce the names of any parties. There are some kind of obvious candidates that we interact with. And I think our goal would be to enter into that type of relationship within the next six months or so. Well in time for it to become a partner for us within the [DMA] development of the drug, DMA-directed development of the drug.

Charles Duncan - Piper Jaffray

Thanks for the additive color. Congrats on the deal.

Patrick Mahaffy

Thank you.

Operator

Thank you for your question. Your next question comes from the line of Yaron Werber of Citi. Please proceed.

Yaron Werber - Citi

Yeah. Hi and thanks for taking my question as well. So I have a couple of questions and really sort of have to do with trying to figure out a little bit how soon, when we look at the IC50s for this compound versus some of the other compounds like for example nintedanib, it’s a BIBF-1120 from BI. So the drugs look very -- your drug is a little more potent in insulin receptors, but they overall both drugs are sort of VEGF-1, 2, 3 FGR-1, 2, 3 and a little bit of fibroblast growth factor, I am sorry, endothelial growth factor. But that drug doesn’t seem to have the hypertension and they just filed it for lung cancer with survival. And so I am just trying to get your sense as what’s the difference there? And then I have a follow-up if you don’t mind.

Patrick Mahaffy

Yeah. So it’s a great question, Yaron. And what we've learned with this whole class of tyrosine kinase inhibitors is that the IC50s are start and the direction we have forward for what you should be looking for clinically, but they do not tell you what the drug would actually do in the clinic.

And the best example of that I think it proves the point to beyond the debate is sorafenib which is the name because in vitro it’s a beautiful RAK inhibitor. And sorafenib was studied as you remember 5 to 10 years ago in large trials in mutant BRAF melanoma. And it was a complete burst. And obviously the conclusion at the end of this study with either sorafenib described as beautiful IC50 against mutant BRAF, doesn’t touch BRAF in patients or BRAF was a tolerable target in melanoma, but obviously vemurafenib came in and demonstrated that BRAF is a great target in melanoma and the issue is that sorafenib despite the IC50s doesn’t actually inhibit the kinase in patients.

And why is that, well in vitro I’d say they are often as recombinant fragments of protein which don’t look quite the same as the full free dimensional protein in its native confirmation plus once you are in cellular system has lots of other powerplay activity cross stroke that means that what you see in an isolated in vitro system may not be recapitulated in the more complex kind of environment to the real tumor in the real patient.

So the principle of being cautious about over extrapolating IC50 is well established. And as you’ve just illuminated with nintedanib BIBF, they don’t see hypertension. So it clearly it is not hitting the VEGF receptors which are uniformly agreed to be a clear driver of hypertension and blood pressure is a good pharmacodynamic marker or VEGF receptor inhibition particularly VEGFR2.

So again we got to be very careful when you set up your competitive set using IC50s and thus we obviously focus on the clinical data and that’s what’s the strategy about this molecule. As Pat said we started looking this couple of years ago, when Jean-Charles Soria first got it to our attention. And in those early days given the IC50s, we weren’t so excited, but what got us excited over the following two years was the emerging clinical data set, that’s clearly differentiated from all of the competitors both the multitargeted kinases and the pure FGFR inhibitors as I described.

So the clinical constellation of toxicity and efficacy is what has excited investigator this and now us about molecule and that’s why we did the deal.

Yaron Werber - Citi

Okay, thank you. And then the two studies that you guys are planning on starting in FGFR1 and then the 11q-amplified patients. Is Servier still going to pay for those studies or are those your studies?

Patrick Mahaffy

What we're doing with Servier is developing a global development plan, but lung cancer study is already agreed component of the global development plan. We believe that the breast cancer study that Andrew described that we are doing in at this date is highly consistent with the global development plan and therefore it should be a part of it. So I think what we clearly believe is that we will have very modest R&D expenses of our own in the next two to three years.

Yaron Werber - Citi

Okay. And then just finally, if you don’t mind. What about adeno? And any plans to do adeno studies just given the data from nintedanib showed overall survival adenocarcinoma, lung?

Patrick Mahaffy

Yes. So that’s a very interesting question. We’ve embarked on discussion with lung cancer community obviously whom we know very well as to whether the FGFR1 and 11q amplicon is the best way to find patients who might benefit from lucitanib. Now there is not much FGFR1 amplification and in adenocarcinoma.

But interestingly if you look at TCGA and just look at MRNA expression which obviously is contained in our data set you can find that there are some adenocarcinoma patients who have high apparent expression of FGFR1 protein, not amplify which is high protein expression. And there were some data presented at Sydney the World Lung Meeting just a couple of weeks ago from the group at Denver Pia Hirsch’s team suggesting that looking at protein maybe an alternative maybe superior way of identifying patients who could benefit from drugs that inhibit the FGF receptor.

So where those are plugged into that community and we’re actively exploring that because clearly you want to come up with the best test for your drug in real patients and following the kind of gene amplification path is a rational thing to do and looks very promising, but doesn’t mean it’s the only thing to do. So we are certainly open to exploring broader diagnostic approaches to truly answering the questions who are the right patients to get this drug.

Yaron Werber - Citi

Okay thank you.

Patrick Mahaffy

Sure.

Operator

Thank you for your question. Your next question comes from the line of Brian Klein of Stifel. Please proceed.

Brian Klein - Stifel

Great, thank you for taking my questions. I maybe start with you Andrew. I had a question on FGF specifically wanting to know if the mutations are de novo in these patients or if they’re induced by prior chemotherapies?

Andrew Allen

As far as we can tell the amplifications which is what I focused on as opposed to point mutations obviously amplifications which is what I focused on as opposed to point mutations, obviously they both exist, but we are focused on the amplifications. They appear to be de novo that found in the PCGA dataset, many of those patients are treatment-naive and the specimens of surgical reception specimens taken from patients at that first surgical procedure when they are undergoing attempted curative surgery. So there could be de novo alterations.

Brian Klein - Stifel

Great. And then specifically in non-small cell lung cancer in FGF mutation or amplification, is that mutually exclusive from some of the other known mutations that are being targeted for example EGFR or ALK?

Andrew Allen

Yeah, that's a very good question. So early days, the answer is yes. Now in squamous there are not lots of other mutations well defined. So the FGFR1 amplified group kind of lives on its own. But in adeno whereas you obviously know there are lots of other mutations being described both the EGF receptor and K-RAS being the most common. There appears to be relative mutual exclusivity for EGFR mutation for amplification, sorry, alterations of ALK, the gene fusion protein possibly for rat, because obviously that’s pretty rare, K-RAS is a little bit of overlap. And so it's unclear exactly what the driver is. And obviously it’s not something we'll be exploring with our collaborators both in vitro and then clinically over the next year or so.

Brian Klein - Stifel

Great. And then regarding the data that's already been generated, what gives you the confidence that all of the effect is not just due to VEGF inhibition?

Andrew Allen

Well, VEGF inhibitions obviously have been used broadly in lung cancer and breast cancer and you don’t see 50% response rates. So I think your question is a good one, because we don't have the hyperphosphatemia toxicity that tells you that hits all FGF receptors. But what we see is distinct to efficacy. That waterfall plot is not the waterfall plot, but any of the other pure VEGF inhibitors or relatively pure VEGF inhibitors when used in breast cancer.

So it's the constellation of VEGF and FGF that we think is driving this distinctive and obviously very attractive clinical profile that is benefiting some mutations at this point.

Brian Klein - Stifel

And then lastly on safety, the 50% Grade 3, 4 hypertension is not really that benign of the side effect. How are -- beyond just the traditional therapies, how are these patients being monitored for to prevent hypertensive crisis or some other major cardiovascular event?

Andrew Allen

Well, if you speak to clinicians to use the drug, they are very comfortable with VEGF inhibitors and with managing VEGF inhibitor-induced hypertension. Grade 3 is a 160/110, that's a blood pressure that’s not obviously clinical context around those numbers, but that's not intrinsically an alarming number in terms of an acute immediate problem and physicians are very comfortable in introducing and escalating anti-hypertensive as required. They probably become very seasoned doing this over the last five years with sorafenib, pazopanib, axitinib etcetera out there now and approved for renal cell and some other tumors.

So typically these are asymptomatic, these are blood pressure readings in the clinic, they are readily managed by the physicians and monitoring on periodic visits has been adequate to manage the toxicity. There has been no case of malignant or accelerated phase hypertension with the stroke in the clinical dataset to-date. So obviously one is mindful of it, one is that we’re looking out for it, but it probably appeared to be a real clinical problem so far with monitoring this in place is adequate.

Brian Klein - Stifel

Great, thank you for taking my questions.

Operator

Your next question comes from the line of Peter Lawson of Mizuho Securities USA. Please go ahead.

Peter Lawson - Mizuho Securities

I guess this question is for Patrick, just on the deal. Why didn’t you try and gained rights for Europe?

Patrick Mahaffy

Well, those rights had already been negotiated in the Servier contract. So that deal with Servier was signed over a year ago and so that it’s impossible for us to get European [rights].

Peter Lawson - Mizuho Securities

But you didn’t try going after those even though you’re trying to acquire those in addition to the US and Japanese rights?

Patrick Mahaffy

Well no, I mean, our negotiation is with the deal, it’s not with Servier. The Servier is an absolutely committed and enthusiastic owner of those rights. And in fact, the part of the enthusiasm that has been generated around this compound (inaudible) has come not only from the investigators, but the absolute commitment to the drug that Servier has. So that would have been impossible had we even requested it.

Peter Lawson - Mizuho Securities

Got it. And is there any -- is there a lot work associated with consolidating R&D in Europe like bring it back to the U.S.?

Patrick Mahaffy

No. This is very simple for us.

Peter Lawson - Mizuho Securities

Okay. And then just around the FGF-aberration. I mean the cuts across all breast cancer types, does that late trial design or potential labels more complex?

Andrew Allen

Yeah. I mean, I think if you’re referring to in particular Her-2 versus ER-positive, obviously those diseases are treated differently. And so if you’re looking to develop a drug in a second or third line setting, you’ll be doing a study that will either be in ER-positive patients or in Her-2 positive patients because the other therapies will be different between those two. So the simple answer is yes, you’ll develop those separately.

Unfortunately many patients do reach an end stage where they kind of exhausted prior therapies and then there is some commonality and we could do a kind of monotherapy study against the physician’s choice. That’s conceivable as a kind of salvage study, which I guess that someone might be even greater than pivotal study that we could do that 30-year or so ago, but the earlier indications you will be targeting ER-positive or Her-2 positive and treating them separately.

Peter Lawson - Mizuho Securities

Are there any major changes in your U.S. sponsored trial versus the Phase II trials that are about to start? I guess I am trying to get at, is there anything that you would have done differently in those European Phase II trials?

Andrew Allen

I think we regard these as complementary and Phase II obviously is about establishing the optimal approach on the optimal patients for your Phase III study. Servier and the big consortium have launched a very nice trial that answers a very important question which is who should we be treating? And so they are focused on this question, is it the FGFR1, is it the 11q and is there any value in treating patients who don’t have one of those atrial fibrillation, that’s the primary question, but that study is answering.

There is still a little less impression around what is the best dosing strategy for the drug? That study is a FENESSE trial is beginning with 15 milligrams once a day. And the question that we told the answer is whether there is value in starting little bit higher and de-escalating or whether in fact starting lower will help reduce any of the adverse events and deliver the same efficacy.

That’s not an exactly the answer because of course you don’t get that answer out of the Phase I study. And so we will probably look at the dosing question and fix the patient groups a little bit more. So between us, we will on two studies that will gather global experience and answer those two very important questions giving us a very good slim shot into hopefully a successful Phase III.

Peter Lawson - Mizuho Securities

Got you. Thank you. That is very helpful. Thanks for taking the questions.

Operator

Your next question comes from the line of (inaudible) William Blair. Please proceed.

Unidentified Analyst

Thank you for taking my questions. I am just curious about some biology, can you just distinguish for us FGFR1, 2 versus 3, 4? And also whether the FGF 3, 4, 19 they were signalled through which receptors?

Andrew Allen

Let me try and do that sort of at a high level, the FGF family is amazingly complex. And FGF biology includes obviously tumors, but also many, many other aspects of normal homeostasis of the body. FGF-19 is involved in glucose homeostasis. FGF-23 is involved in renal phosphate excretion. So I won’t give you exhausted chapter and verse.

Sufficed to say that there are family of around 20 different ligands, there is a family of four receptors FGFR-4 is very limited in distribution so most people are focused on FGFR1, 2, 3. The evidence that we have appears to be one perhaps more important to the phosphate excretion piece and obviously we don’t inhibit the phosphate excretion, therefore we don’t do (inaudible) adverse event profile.

FGFR1 and 2 are probably the most cancer relevant and there are multiple ligands for FGFR1 and 2 from within the FGF family. So obviously FGF-2 is one of the strongest ligands for FGFR1. Again we’re getting better in-situ here, but if you wanted to sort of isolate that’s probably a pair that is well described.

But sufficed to say that R1 and R2 are probably the most cancer relevant and of the ligands 3, 4 and 19 are not the only ones that are relevant for R1 and R2, but they are sitting on this common amplicon, they are found frequently in cancers and obviously the data we’ve generated suggest that that maybe a relevant pairing that defines the group of patients who benefit from drug.

I am going through this in a little bit more detail at our R&D Day when we will have more time and we can sort of show some of this in slide format, but it is a obviously extremely complex in some way simply just to look at the clinical profile and like what you see.

Unidentified Analyst

Right. And if you don't mind for the VEGF1, 2, 3 apparently some other drugs are very VEGF2 specific, just curious from your perspective [Pan] versus specific?

Andrew Allen

Yeah, again the question -- the data suggests that receptor 2 is the key for new vessel formation for angiogenesis at (inaudible) tumors. 1 and 3 obviously have important role, they had other ligand besides from VEGF, obviously there are several members of the VEGF family as well VEGF-A, VEGF-B et cetera. So again a complicated family, this molecule seems to hit all receptors 1, 2, 3 which has impact on tumor angiogenesis, perhaps on tumor lymphomagenesis as well.

Again the clinical consequence appears to be an impressive waterfall. So we won't be able to pass that out, it's very hard to do that in humans. There is the enormous mixture on this field. And again we are going to present a little more detail at the R&D Day.

Unidentified Analyst

Thank you. And congrats.

Operator

Your next question comes from the line of Ravi Malhotra of Credit Suisse. Please proceed.

Ravi Mehrotra - Credit Suisse

Thanks for taking my questions and congrats on a great deal. Obviously all the smart ones have been asked and I'll ask the potentially done ones. Could you just confirm that unless you get a good go decision that there is no effect to change to the cash burn or no material test to cash burn approximately what you see for (inaudible)? And secondly going back to [I1120] is it potential for your drug as it were in IPA? Thank you.

Erle Mast

Hi Ravi, it’s Erle. I’ll take the first one. Yes, we can confirm your comment about the cash burn, I think as we've talked about looking for business development opportunities and the desired product portfolio we've consistently been conscious of our cash burn over the next few years, both our cap rate of 1686 in 2014 moving into multiple trials and so that will have an impact on our R&D expenditure.

So clearly one of the attractive economic features to this deal was structure where about we were allowed to bring in very attractive Phase II compound consistent with our other development program strategies and do it in a way where the impacts on the near-term two to three years, R&D expenditures would not be significant, so a unique and very attractive feature of this deal for us.

Andrew Allen

And on the IPS front, in theory yes that could be a place for this asset base, but obviously as our main suggest, we’re very oncology centric and our development will be focused on cancer.

Ravi Mehrotra - Credit Suisse

Understood. Thank you.

Operator

Your next question comes from the line of Marko Kozul of Leerink Swann. Please proceed.

Marko Kozul - Leerink Swann

Good morning and congrats on bringing in a very interesting compound. My first question for a lot of good ones is around the companion diagnostic and I’m wondering whether you might consider pursuing a development path similar to [caprate] where there is potential to extend the number of mutations proactively the drug might benefited beyond FGF-aberration mutations? Thanks.

Andrew Allen

Yeah. I mean FISH is obviously a simple assay, there are approved PMA FISH tests, so that those represent the easiest path in some ways, next-gen sequencing clearly is a more challenging technology, but obviously yesterday the first next-gen sequencing test was approved by the FDA with the [my seek] approval. So obviously as you know, we’re working with foundation medicine as you mentioned the capital program and more and more centers are using sequencing as the single [mortality] to classify their patients’ tumors and get onto many questions as opposed to the focus on single analyze with multiple tests.

So we had open minded this one Marko and obviously we’ll do what we think is the right thing. But the program to-date is focused upon FISH. And so we know that this drug has the activity we've described in FISH positive patients. We will be looking at questions to whether there are other patients that can benefit and how to identify those patients. The answer is NGS is the right way and obviously we look at that seriously because we’re not intimidated by NGS, but if you want to go there if you need to.

Marko Kozul - Leerink Swann

So Andrew, thank you for that. And maybe just a general one here, I realized you’ll have greater detail at the upcoming Analyst Day, but could you walk us through the general timelines for when you should have data from the various studies that are starting?

Andrew Allen

So the Phase I/II study is wrapping up now and obviously we’ll be able to hopefully show final data probably at the ASCO next year. In terms of the new studies, obviously we don’t have data from those at ASCO. It will be later in the year and in 2015 when those data will start to come through.

So we may have some early data at the end of ‘14. For example in the breast studies we may have some data in San Antonio, but it will be interim data, but obviously the more complete dataset from the Phase II study will start to come through in ‘15. And depending upon the pivotal trials that we adopt obviously the pivotal studies will be starting presumably around that time as well.

Marko Kozul - Leerink Swann

Okay, terrific. And I realized we have a fair amount of development ahead of us, but in terms of potential pricing, can you talk a little bit about what other targeted therapies maybe you think of as potential proxies?

Patrick Mahaffy

I think it’s a little bit early for us to talk about our pricing, we should be aware of what we think recently approved oncology drug [price tag]. We all see the same data and we will participate in that marketplace in a consistent manner, but it’s too early for us to talk about pricing specifically today.

Marko Kozul - Leerink Swann

Terrific. And one last question and let’s say Servier is planning an advanced breast cancer study, can you talk a little bit about what you understand the design of that one to be?

Andrew Allen

Are you talking about the FINESSE Phase II study, Marko?

Marko Kozul - Leerink Swann

There is another study beyond FINESSE with the 120 patients or so?

Andrew Allen

That’s FINESSE 120, so that is the design with the three arms up to 41 patients per arm looking at the three groups of patients, FGFR1 amplifies in one cohort, 11q amplified in another cohort and then double negative is it were in the third cohort. So that’s the study that Servier had publicly announced that is open now and is about to enroll their first patient.

Marko Kozul - Leerink Swann

Terrific. I look forward to the progress. Thanks.

Operator

Thank you for your questions. Ladies and gentlemen, I would now like to turn the call over to Breanna Burkart for closing remarks.

Breanna Burkart

We thank you for your interest in Clovis Oncology today. If you have any follow-up questions, please call me at 303-625-5023. This call can be accessed via replay of our webcast at www.clovisoncology.com beginning in about one hour and will be available for 30 days. Again, we appreciate your interest and time. Thank you and have a good day.

Operator

Thank you for joining today’s conference, ladies and gentlemen. This concludes the presentation. You may now disconnect. Have a very good day.

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