Clovis Oncology, Inc. (CLVS) CEO Patrick Mahaffy on Q3 2018 Results - Earnings Call Transcript

About: Clovis Oncology (CLVS)
by: SA Transcripts

Clovis Oncology (NASDAQ:CLVS) Q3 2018 Results Earnings Conference Call October 30, 2018 4:30 PM ET


Breanna Burkart - Vice President of Investor Relations

Patrick Mahaffy - President and CEO

Dan Muehl - SVP of Finance and Principal Finance and Accounting Officer


Kennen MacKay - RBC Capital Markets

Tazeen Ahmad - Bank of America

Terence Flynn - Goldman Sachs

Cory Kasimov - JPMorgan

Gena Wang - Barclays

Peter Lawson - SunTrust Robinson

Joe Catanzaro - Piper Jaffray

Michael Schmidt - Guggenheim


Good afternoon. My name is Amelia, and I will be your conference operator today. At this time, I would like to welcome everyone to the Clovis Oncology Q3 2018 Financial Results call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks there will be a question-and-answer session. [Operator Instructions] Thank you.

I would now like to introduce your host for today's conference, Ms. Breanna Burkart Vice President, Investor Relations. You may begin your conference.

Breanna Burkart

Thank you. Good afternoon and welcome. You should have received the news released announced in our financial results. If not, it is available on our website at As a reminder, this conference call is being recorded and webcast. Second quarter 2018 conference Remarks may be accessed live on our website during the call and will be available in our archive for the next several weeks.

The agenda for today's call is as follows: Patrick Mahaffy, Clovis' President and CEO, will discuss the key components of our corporate update provided in today's news release; then Dan Muehl, Senior Vice President of Finance and Principal Financial and Accounting Officer, will cover the financial results for the third quarter in greater detail. Patrick will make a few closing remarks, and then we'll 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 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'd like to turn the call over to Patrick Mahaffy.

Patrick Mahaffy

Thanks, Breanna. Welcome, everybody. I'll begin with an update on the U.S. launch of Rubraca in the recurrent ovarian cancer maintenance treatment setting in the all-comers population following its Q2 in 2018 FDA approval. During the third quarter of 2018 we recorded $22.8 million in Rubraca sales. This does not include the $9.6 million in commercial value provided to eligible patients, primarily Medicare patients as free drug supply through our patient assistance program.

The supply of this free drug represents approximately 30% of overall commercial supply up from the approximately 25% reported for the second quarter of 2018. Absent relevant funding of the foundation that had historically provided copay assistance to these patients, this will likely continue at this level. While we remain confident in Rubraca's potential in the second line maintenance indication, we recognize that PARP inhibitor penetration in this setting appears to remain relatively flat at approximately 35% to 40%. In addition to growing this market we also need to grow our share of the overall PARP market which we estimate is approximately 20% today.

We review three primarily challenges to our growth in the ovarian cancer space. Patient assistance programs or free drug, the continued used of watch and wait by U.S. clinicians treating ovarian cancer and a perceived lack of differentiation amongst the market at PARP inhibitors. With regards to our patient assistance program the purpose is to help eligible patients who do not have insurance, who are under insured or whose health plan won't pay for Rubraca. The vast majority of the patients enrolled in our PARP are Medicare patients unable to pay their coverage GAAP and coinsurance.

We have evaluated our PARP eligibility criteria and recently began requiring greater documentation of need and a higher economic threshold to qualify. However, these requirements are consistent with those of other oncology drug companies and we anticipate that the proportion of Rubraca patients eligible for free drug will persist at current rates for the foreseeable future.

While there is little we can do related to the supply of free drug through our patient assistance program, we are committed to doing a much better job at addressing market growth and market share growth. The watch and wait approach continues to be the most widely followed practice after second line platinum therapy despite numerous published data sets demonstrating that PARP inhibitors offer better outcomes than placebo which is the equivalent of watch and wait in the platinum sensitive second line maintenance setting.

To address this, in October we launched our [indiscernible] messaging and direct promotional materials to all ovarian cancer treaters [ph] in the U.S. to emphasize the fact that all eligible second line patients should receive PARP maintenance therapy in general and Rubraca in particular. This program also highlights data from a pre-specified exploratory analysis from the ARIEL3 study demonstrating that not only can Rubraca maintain PFS, they may in some patients also further their response coming on platinum therapy including converting some partial responses to complete responses.

This message has resonated with physicians who see the opportunity for additional tumor shrinkage while in the maintenance setting as a meaningful benefit for their patients. We're also expanding our regional account team to educate key accounts about the significant gap in patient care and establishing the importance of second line maintenance therapy.

And we also recently expanded our nurse education group which counsels nurses and mid level practitioners on the importance of second lien maintenance and the management of patients on Rubraca. We believe this two-part efficacy message maintaining progression free survival and the potential for further tumor shrinkage will have a positive impact on our market share and on the market in general.

We also recognize the importance of highlighting differentiation amongst department hitters. To this end as I said earlier, the launch of the maintenance program was designed to establish the importance of second line maintenance therapy and to distinguish our unique subjective response rate data beyond the improvement and progression free survival versus placebo. To support this we are currently launching significant patient and branded resources into the marketplace across all of our customer channels. These are being executed both through our sales teams and digitally to support the ongoing launch of Rubraca.

We announced yesterday the departure of our Chief Commercial Officer. We believe this change represents an opportunity for Clovis to bring in new commercial oncology expertise for this role and we have initiated an active search. We think a fresh perspective in this position will be invigorating.

I'd also like to highlight the addition of two new board members, Bob Azelby and Rick Fair. We are very pleased to have them join our team and their deep experience with oncology launches and commercialization will serve us well in the coming months and quarters. I have already benefited from their active engagement.

I'll turn now to discussing our regulatory progress in Europe. In early July our variation to the European marketing authorization for Rubraca to improve the second line related maintenance treatment indication was validated by the EMA and is under active review. This variation if approved would expand our addressable population to improve the broader all-comers population based on data from ARIEL3.

We anticipate a CHMP opinion for the maintenance indication by year-end 2018, with a potential formal European Commission approval in early 2019. Accordingly, we are actively preparing for an early 2019 planned launch initially focused on Germany.

The majority of additional hires including the sales reps will coincide with reimbursement approval in the individual countries and will occur in late 2019 and early 2020 as will any meaningful revenues from those territories. Of course our regulatory clinical safety quality and supply chain teams are already in place in our Cambridge UK office.

We maintain that early access program in a limited number of European countries for Rubraca for treatment and as maintenance therapy in recurrent ovarian cancer to allow access to [indiscernible] for patients in need until the time the drug is commercially available.

Let me turn now to clinical development. I'll begin with the recently presented data from or TRITON2 study at ESMO in Munich earlier this month and at the Prostate Cancer Foundation Scientific Retreat last weekend. We were pleased to present the initial data from the study, which include the same data set upon which breakthrough therapy designation was granted us in early October. In a poster discussion session at the conference 44% confirmed objective response rate was reported in 25 RECIST evaluable patients with BRCA alteration. And our median duration response has not yet been reached.

51% confirmed PSA response was observed and 45 PSA evaluable patients with BRCA alteration. It is important to note that while responses have been shown for other PARP inhibitors based on surrogate or composite endpoints, this represents the largest reported population of advanced mutant BRCA prostate cancer patients using the endpoint of RECIST response.

The preliminary safety data for Rubraca in men with castration resistant prostate cancer are consistent with those observed in patients with ovarian cancer and in other solid tumors. Also at the conference in a separate poster discussion session TRITON screening data were presented which provide initial genomic profiling data from the TRITON clinical program. DNA samples identified alterations in BRCA1 or BRCA2 in approximately 12% of CRPC patients screened for the TRITON2 study.

Data demonstrates that plasma cell-free circulating tumor DNA samples are highly consistent with tumor tissue in identifying BRCA1 or BRCA2 mutations and clearly offers a less invasive screening option in tumor tissue testing.

Based on FDA input at the time we initiated the TRITON program, we believe the RECIST response data from TRITON2 could be used as the basis for the supplemental NDA to support an accelerated approval for Rubraca in mutant BRCA metastatic castrate-resistant prostate cancer. The PSA response could be sued as supportive data. Pending data, we currently expect to submit the supplemental NDA before the end of 2019 and are taking active steps to see it accelerated this time.

Our second Clovis-sponsored prostate study is TRITON3, a randomized comparative Phase 3 study that includes patients who have a tumor germline or somatic BRCA or ATM mutation, who have progressed on AR-targeted therapy and not yet received chemotherapy in the metastatic castration-resistant setting. The study will compare Rubraca to physician's choice of AR-targeted therapy or chemotherapy. Planned primary endpoint is radiological progression-free survival. And this study could potentially serve as a confirmatory study, should the TRITON2 study result in an accelerated approval.

We are also enthusiastic about our collaboration with Bristol-Myers Squibb in prostate cancer. As part of that collaboration, a Phase 2 prostate cancer study initiated in late 2017 and is sponsored and conducted by BMS. The study will evaluate the safety and efficacy of Opdivo in combination with Rubraca, in patients with metastatic castrate-resistant prostate cancer and is being conducted as an arm of a larger BMS-sponsored study in a total of 300 patients. Importantly, this prostate study is enrolling BRCA, HRD and biomarker negative patients and will generate preliminary data on the relative benefits of the combination in these distinct patient populations.

Let me turn now to another new indication beyond prostate cancer. Our ATLAS study is a single-arm Phase 2 open-label study of Rubraca as monotherapy in recurrent metastatic bladder cancer. This is an all-comers population, with no selection based on HRD status. Eligible patients are those who have failed 1 or 2 prior therapies. This study is currently enrolling patients and is designed to potentially support an accelerated approval.

Given that bladder cancer is particularly responsive to platinum-based therapy and that approximately 2/3 of patients who have tumors are HRD, we are hopeful about the potential for Rubraca in this indication. This trial is enrolling quickly and we anticipate completing enrollment in this study by Q3 2019 and potentially presenting an initial look at data as early as the fall 2019 medical meeting.

Of course we remain very active in seeking to expand our footprint in ovarian cancer. The most important of these studies is the ATHENA study which is part of our clinical collaboration with Bristol-Myers Squibb. This Clovis-sponsored study is a Phase 3 trial in advanced ovarian cancer in the frontline maintenance treatment setting and is currently enrolling patients. ATHENA will evaluate Rubraca, Opdivo and placebo in newly diagnosed patients with a streak for high-grade ovarian fallopian tube or primary peritoneal cancer who have completed platinum based chemotherapy. We signed approximately 1000 patients including all-comers population with a step down statistical plan similar to ARIEL3.

ATHENA is conducted in association with the GOG in the U.S. and ENGOT in Europe which are the two largest cooperative groups dedicated to treatment of gynecologic cancers in the U.S. and Europe which we believe will facilitate more rapid enrollment in the trial. As an example, GOG recently enrolled 1100 patients in a frontline ovarian cancer study in just 22 months. Additionally the Clovis-sponsored ARIEL4 our confirmatory study versus chemotherapy in the mutant BRCA ovarian cancer treatment setting continues to enroll.

And ARIES our planned Clovis-sponsored Phase 2 open label multi-cohort studies evaluation the combination of Rubraca and Opdivo in patients with relapsed BRCA wild-type ovarian cancer as well as in patients with locally advanced or metastatic bladder cancer and is expected to begin early 2019. We are well aware of the desire to see robust combination results for PARP inhibitors and I/O agents broadly, and for Rubraca and Opdivo specifically. We are therefore pleased to get this study going and we will look for an opportunity to provide initial data from this study before the end of next year.

The Phase 1/2 combination study of Immunomedics sacituzumab govitecan and Rubraca for the treatment of advanced metastatic triple-negative breast cancer, relapsed platinum resistant ovarian cancer and metastatic urothelial cancers is sponsored by Clovis and is expected to begin enrolling patients in the first half of 2019.

And finally a Phase 1B study in collaboration with Genentech to evaluate a novel combination therapy of their cancer immunotherapy, TECENTRIQ and Rubraca continues to enroll patients. The Phase 1 portion of this study sponsored by Genentech-Roche is complete and the recommended Phase 2 dose is full dose atezolizumab and full dose Rubraca and the trial is now enrolling patient cohorts in triple-negative breast and ovarian cancers.

To wrap up our clinical development update for Rubraca, there are over 30 investigator sponsored monotherapy or combination therapy studies in a variety of tumor types approved or under way.

Now I'll spend a few minutes describing Lucitanib. Lucitanib is an oral potent inhibitor of the tyrosine kinase activity of vascular endothelial growth factor receptors 1 through 3, platelet-derived growth factor receptors alpha and beta and fibroblast growth factor receptors 1 through 3. Lucitanib was a subject of a partnership with Servier established in 2013, where Servier had gained rights to lucitanib worldwide, except for the U.S. and Japan, where we hold rights. In partnership with Servier, we evaluated lucitanib in breast and lung cancers based on hypothesis of activity in FGF receptor driven tumors. The data from these studies were insufficient to move the program forward and that development was discontinued in early 2016.

Until recently we have said little about lucitanib other than to note that we expect that Servier will turn rights to us. We have received those rights back and we now own global rights excluding China for lucitanib. Recently there have been very encouraging data in studies of a very similar drug to lucitanib. Now this is at the same 3 VEGF, PDGF, and FGF receptor pathways called LENVIMA, or lenvatinib, in combination with the PD1 inhibitor in this case KEYTRUDA.

These data represent a validated, compelling and alternative hypothesis for the development of lucitanib in combination with a PD1 or PDL1 and a Clovis sponsored combination study is now being planned. We've also discussed our intension to initiate a study of lucitanib in combination with rucaparib, based on encouraging data of VEGF inhibitors and PARP inhibitors in combination. Each of these studies is expected to initiate no later than Q1 2019.

For a preclinical overview of lucitanib please visit the Events and Presentations page on our website. I have noted in the past that we needed to manufacture lower dosage strength tablets of lucitanib for use in these combination studies. We have successfully done so and are on track to have drug supply delivered for these combination studies before the end of the year.

The composition of matter patent for lucitanib does not expire until 2030 in the U.S. and we expect an additional three or even four years of Hatch-Waxman extinctions in the U.S., depending on the date of the first potential U.S. approval. Patent protection in the EU with extinctions will be similar.

With that, I'll turn the call over to Dan to discuss third quarter financial results.

Dan Muehl

Thanks Patrick and good afternoon everyone. Our third quarter 2018 financial results are included in this afternoon's press release. I’ll review the highlights of our financial results and provide some additional commentary. Product revenue is $22.8 million for Q3, 2018 compared to Q2, 2018 [ph] revenues of $23.8 million. This compares to $16.8 million in Q3, 2017 revenue or a 36% quarterly increase year-over -year. Our inventory distributors has ranged from two and a half weeks to four weeks since our initial launch in late 2016.

Inventory at the end of Q3 was on the low end of this range at approximately three weeks and represented a negative impact of $2.4 million to revenue in Q3, 2018. The supply of free drug provided through our patient assistance programs totaled $9.6 million in commercial value during the quarter and $23 million for the first nine months of 2018. This represents approximately 30% of overall commercial supply for the quarter.

Turning now to our balance sheet, we ended the third quarter of 2018 with $604.4 million in cash, cash equivalents and available for sale of securities. Cash used in operating activities with $72.5 million for Q3, 2018 compared with $45.8 million for Q3, 2017. The $72.5 million in cash used in Q3, 2018 is a sequential reduction than the cash used in Q2, 2018 of $110.2 million primarily due to fewer payments for drug supply than last quarter. We reported a net loss of $89.9 million or $1.71 per share for Q3, 2018 compared to $60.7 million or $1.24 per share for Q3, 2017.

Our Q3, 2018 R&D expenses totaled $63.9 million compared to $38.9 million in Q3, 2017. R&D expenses will continue to increase year-over-year as our planned clinical studies and development activities progress. Selling, general, and administrative expenses totaled $42.5 million for Q3, 2018 compared to $35 million in Q3, 2017. SG&A expenses will also continue to increase year-over-year in support of our commercial activities related to Rubraca in the United States and Europe.

Now I'll provide some further color on Rubraca from a finance perspective. Revenues recorded net of estimated rebates, charge backs, discounts and other deductions, as well as estimate of product returns, these gross to net adjustments totaled approximately 11% of gross revenue for Q3, 2018. Gross to net adjustments are expected to be in the low double digits as a percentage of gross revenue for the remainder of 2018 assuming the distribution and payer mix remained consistent.

Cost of product sales for the third quarter of 2018 was $4.8 million or 21% of product revenue. We expect the cost of sales percentage to increase slightly for the remainder of 2018. Based on current trends, we currently anticipate Q4, 2018 revenues to be consistent with or slightly higher than Q3, 2018 reported revenues. We anticipate providing full year 2019 guidance in early January 2019.

I'll turn the call over to Pat.

Patrick Mahaffy

Thanks Dan. To close, we're pleased with our development progress with a variety of meaningful activities underway. Our prostate cancer development program continues to enroll patients in the both TRITON2 and TRITON3 and based on the very encouraging data presented at ESMO and at the PCF for BRCA mutant patients with advanced metastatic castration resistant prostate cancer from TRITON2 we continue to anticipate a potential supplemental NDA filing, pending data by the end of 2019. With breakthrough therapy designation for this patient population based on the ESMO data set, we look forward to identifying the most rapid path to a supplemental NDA submission and we'll provide an update in the event or anticipated timing should accelerate.

Our ATLAS bladder cancer study is enrolling patients quickly and we anticipate completion of enrollment by Q3, 2019 with the first look at initial data potentially in late 2019. We hope to demonstrate Rubraca’s activity in that all-comers patient population. Our combination studies of Rubraca and Opdivo either through our clinical collaboration with Bristol-Myers Squibb or our Clovis sponsored studies are planned or underway including Phase 3 studies in ovarian and breast cancers and Phase 2 studies in advanced prostate cancer, bladder cancer and non-BRCA ovarian cancer.

And we're very enthusiastic about a renewed clinical development program for lucitanib in combination with a PD-1 or PDL-1 and with Rubraca expected to begin no later than early next year and look forward to discussing this program much more over the course of the year.

In Europe we are preparing to launch Rubraca in the ovarian cancer treatment setting as well as a potential broader maintenance treatment indication. We anticipate a CHMP opinion on the maintenance setting before the end of this year and a potential formal European Commission approval in early 2019 and accordingly our commercial type team is gearing up for an early 2019 launch in Germany. And finally and very importantly, we are initiating a number of programs to re accelerate growth in the second line ovarian cancer maintenance market through Rubraca.

With that, we’re happy to answer any questions, you may have.

Question-and-Answer Session


[Operator Instructions] Our first question comes from the line of Kennen MacKay with RBC Capital Markets. Your line is open. Please go ahead.

Kennen MacKay

Hi, thanks for taking the question. I guess maybe first and foremost on the commercial front after seeing the quarter-over-quarter declines here, wondering if you could elaborate maybe a little bit on sort of when some of the commercial plans that you detailed to sort of combat the watch and wait approach as well as the perceived lack of differentiation here, when you think those could maybe start to take effect and maybe help us understand some of the dynamics quarter-over-quarter that led to these sort of slight share declines if you are seeing growth in any of the approved indications in the U.S. or where it's sort of been stable or declining?

Patrick Mahaffy

Yes, so I think the quarter-over-quarter number the Q2 to Q3 number can be easily explained by inventory alone which Dan referenced and also by the increase in the path beyond that by the increase in the path program from about 25% of our commercial supply to approximately 30% of our commercial supply. In fact, with the effect of these two trends, we are seeing continuing growth in the United States. It unfortunately it did not translate into revenues because of those reasons.

We have been pleased with the reaction to this maintenance [ph] program which launched in early October. I am hopeful that we will begin to see the impact of those programs during this quarter. I also think that the, we hope that the supply of free drug will begin to stabilize at or around this number. And obviously our redoubling our efforts both at the sales side and the marketing side to increase the number of new patient starts on our drug.

Kennen MacKay

Got it and then maybe just to address the final point on commercial differentiation in ovarian and sort of this perceived lack of differentiation, could you maybe talk about how some of the headwinds that you are facing in ovarian cancer might be somewhat different in prostate cancer and help us think about that market opportunity as it relates to what we've seen in ovarian?

Patrick Mahaffy

First on the differentiation, you've all heard this from KOL. So this is not information that you haven't heard before and I think the two things that we are pounding on or one is that we are the only PARP inhibitor that by bicker has shown a progression free survival of over 12 months in the maintenance setting and we are really pounding our PFS message.

But what we have found in a world that sees that the hazard ratio is relatively similar is that KOLs have reacted well to as have prescribers to the idea that we prospectively look at whether or not in ARIEL3 we could see an improvement in response and we did it, not only in BRCA patients but in the all-comer population. That we think represents something of a call to arms to help a patient understand that beyond the benefits of maintenance and delaying chemo she actually has the chance of seeing a furthering of her tumor response which is of course of great importance to any patient with advanced cancer.

So I think we have a chance with these programs to drive what comes out of ARIEL3 is differentiating and to make that case. As to prostate, I would say that an agenda item for us that we take incredibly seriously is doing everything we can to be first. We have seen very significant growth for olaparib in the breast cancer setting where up until about a couple of weeks ago they were the only PARP inhibitor indicated in BRCA triple-negative breast cancer which indication they received in early January. And we understand the benefits that provided AstraZeneca. We seek the same benefit by hopefully taking advantage of what we perceived to be the lead we have now, we have the most substantive reported data in this setting and so we're driving to be first.

It's hard for me to make any claims of differentiation because we're the only company that has demonstrated in a meaningful population a dataset that can be interpreted. So it's a little hard Kennen for me to say and we also think that we're going to be able to show this, that, or the other thing compared to data sets so we of course haven't seen.

Kennen MacKay

Totally understood. We'll keep our eyes on the time to market and potential first mover advantage here. Thank you very much for taking the questions.

Patrick Mahaffy

Thank you, Kennen.


Your next question comes from the line of Tazeen Ahmad with Bank of America. Your line is open. Please go ahead.

Tazeen Ahmad

Hi, good afternoon. Thanks for taking my questions. Pat, I just wanted to get your thoughts on the on the recent SOLO-1 dataset that was presented at ESMO for frontline ovarian. How do you think that dataset is going to impact the market opportunity if at all for Rubraca in the second line maintenance indication and to the extent that you have this information at hand, Can you also let us know, how much of your scripts right now are new start versus perhaps switches from the other PARP?

Patrick Mahaffy

I’ll try that latter one first on SOLO-1 and first of all congratulations stats as anything good news for patients. The SOLO-1 data in germline BRCA a frontline maintenance were good. I would argue as one would have expected in this patient population, the least pre-treated and the most likely to benefit BRCA patients from a PARP inhibitor.

I think it's a little early for me to know exactly, how it may impact on the second line maintenance market for Rubraca, but I'll make a couple of statements that I think are relevant. I think any impacts on the second line maintenance market will be limited to the 15% or at most of germline BRCA patients or at most 25% of patients who are germline and somatic mutated patients, we don't know what ultimately they're going to get in their label.

They did have two somatic patients out of a multiple hundreds that they treated in that frontline maintenance setting, but it would be limited to the BRCA patients. We don't believe and our KOLs don't believe that this is going to translate into use in all-comers population until those data are established potentially from their trial or from other trials but then obviously we're committed to an all-comers population in ATHENA.

Two, there will be a delay in that impact. SOLO-1 will likely be the basis of an approval and frontline maintenance early next year. But it will take time for those patients who come off frontline treatment and go on elaborate in the germline BRCA setting to have moved their way down the funnel into being treated for the second round of platinum and then be eligible for second line maintenance.

And so it will probably be something like 18 months to two years before there's an impact on those scripts delaying the progressions and the initiation of the second platinum based therapy and then the potential for a second line maintenance with another PARP inhibitor. And then the last thing I'll say on this is, when that delayed impact manifests itself. I think it may not be as dramatic on the second line maintenance market as it is on growing, the overall market for PARP inhibitors. As we saw when we had our treatment indication, only 40 percent of our patients had been pre-treated with the PARP inhibitor.

And the willingness or even desire of the clinical community to consider re-treatment with PARP inhibitors particularly with an intervening round of platinum based or other therapy is very, very high. I've mentioned this before, at ASCO, we had an advisory board and we just told the room what percentage of the 14 or 15 physicians would prescribe a PARP inhibitor after a PARP inhibitor, and all but one said they would. The one who said she would limit that limit it to situations where toxicity prevented use in the, for the first PARP inhibitor. So I think it's fantastic data, I think it is great press if anything in patients I think it's great for the class and I think it just will have a modest impact in the short to intermediate term on the second line maintenance market.

If anything, this whole class needs a call to arms for these prescribing physicians to consider maintenance and maybe we'll get some spillover effect from the SOLO-1 data thing maintenance really helps. As to your second question about what's effectively what percentage of our new patient starts are switches, we do see some switches. I don't know what percentage, but I will say that, I will say that the majority of new patient starts are patients who have become newly eligible for second line maintenance, not patients who have come off olaparib or rucaparib [ph].

Tazeen Ahmad

Okay and do you know what percent of your sales are coming from indications other than your label?

Patrick Mahaffy

It's approximately 10% right now.

Tazeen Ahmad

And I guess the last question from me is how are you thinking about the percent of free drug, you've made statements that say that you expect it to stay around 30% is there the potential of it going higher than that?

Patrick Mahaffy

We feel that potential and we have seen in the last month, six weeks a kind of leveling off. And so I don't think, there's any evidence that we're going to see any meaningful increase and we had predicted that this, we gave a range and this is sort of the high end of the range and I hope this is generally where we settle out.

Tazeen Ahmad

Okay, thanks Pat.

Patrick Mahaffy

Thanks Tazeen.


Your next question comes from Terence Flynn with Goldman Sachs. Your line is open. Please go ahead.

Terence Flynn

Hey guys this is Jason on for Terrence. Just for the 3Q Rubraca sales figure, can you give the breakdown between BRCA and non-BRCA patients and then obviously it's early in the maintenance launch, but once that kind of picks up how do you see that BRCA versus non-BRCA breakdown going on the forward?

Patrick Mahaffy

We don't have a breakdown of the BRCA and non-BRCA. The numbers may surprise you. When I give an overall number of the 35% to 40% we are getting PARP inhibitor in the maintenance setting it's only 48% less than half of patients with the BRCA mutation. So there's still a lot of work to do in the most obvious population who would benefit from a PARP inhibitor which is a BRCA mutated patients. But I don't I don't have that breakdown I'm sorry and I don't remember the second question you asked. I'm sorry the second half your question?

Terence Flynn

It was just on how you see that breakdown like evolving over the next few quarters just for the PARP market in general?

Patrick Mahaffy

I would have thought by now both the overall and the BRCA mutated population I would have always expected the BRCA mutated population to be higher, but not as marginally, so as it appears to be right now. I do and continue to believe that this represents a sort of nature and that with three or actually four companies when you think about that the collaborators for lack of trying really hard to encourage physicians not only for their brand but for their class to consider maintenance that, that is going to have an effect on utilization both in the BRCA and the non-BRCA population in second line maintenance.

Terence Flynn

Alright, thank you guys.


Your next question comes from the line of Cory Kasimov with JPMorgan. Your line is open. Please go ahead.

Cory Kasimov

Hey guys this is Shawn on for Cory. So kind of given your sales trends and your spending guidance and sort of just looking at all the trial you guys have ongoing at what point do you need to start prioritizing your capital allocation?

Patrick Mahaffy

We think about capital allocation, all the time we still have sufficient cash for at least two years. We think hard about all the trials we're running, but the trials are value added. They're meant to make us address much larger populations, all-comers and bladder potentially. The mutant BRCA population sooner than any other indication is a new indication for us in prostate and obviously ATHENA we hope to go beyond what was shown for SOLO-1 in the BRCA population alone but to demonstrate meaningful benefit and in all-comers frontline population.

So I think the allocation of our capital is driven by the opportunities that these trials are successful represent in terms of generating revenues. I do not believe that the approximately $100 million run rate is our permanent run rate. We've made a lot of changes around here and we're continuing to initiate new programs. And our goal is to aggressively seek to reinvigorate growth for Rubraca in its present indication and use these other indications to add to it. And of course we have Europe coming online in the early part of next year.


Your next question comes from the line of Peter Lawson with SunTrust Robinson. Your line is open. Please go ahead. Peter? And maybe we should move to next question. Your next question comes from the line of Gena Wang with Barclays. Your line is open. Please go ahead.

Gena Wang

Thank you for taking my questions. I have two questions, the first one regarding the sales again, even if we're taking into consideration of the inventory and if we draw the impact is about $4 million. So if we add this back it's only like $27 million still pretty modest. Just wondering if you can share with us regarding a new patient growth rate versus the last quarter in the last quarter only two months right when the launch in the mean and studying and also where do you see the revenue growth from in 2019?

Patrick Mahaffy

Yes, so new patient starts or the number one driver of long term potential and that's why the effort we're making here to increase the new patient starts on Rubraca is so important. Obviously if we see an improvement in sales in Q4, we obviously would hope that will continue over the course of next year. But where we are going to get growth in the second line maintenance market is a combination of growing the number of prescribers who prescribe a PARP inhibitor and ideally Rubraca and two, continuing to differentiate all those physicians who had determined to use a PARP inhibitor in second line maintenance with the data sets that I described not just our progression free survival, but the maintenance program that demonstrates the potential to further shrink a tumor in a woman who came off a platinum with a partial response. So the programs that I discussed in the earlier part of the call are the programs that we think have the potential to reinvigorate growth for the brand.

Gena Wang

Okay and then 2019 drive revenue growth would that be also mainly U.S. or would that be also meaningful contribution from Europe?

Patrick Mahaffy

We anticipated - as we really gave guidance for 2019 at the J.P. Morgan Conference, so we'll plan to do that in early January. But we would anticipate growth in United States and the beginnings of a contribution from Europe but probably limited to Germany and a handful of other countries where one can launch relatively early without having to negotiate reimbursement.

Gena Wang

Thank you. And then my next question is regarding TRITON3, just wondering what is your estimate percentage of ATM patients in the final enrollment, and any concerns that ATM patient could have negative impact on the Phase 3 read out.

Patrick Mahaffy

Yes, that's a good question I'm glad you asked that. So the ATM percentage was a little bit all over the map, when we looked at our genomic study that was presented at ESMO. It was as low as 6% or 7% of the overall patients screened, but then using plasma testing admittedly in the later line TRITON2 population, it was as high as 14%. So let's take a number in between probably around 10%.

The design of TRITON3 is a step-down design. So the statistical plan has us looking first at the BRCA mutated patients and then we look at all-comers, which basically is BRCA plus ATM. So it was specifically designed to ensure that in the event that activity of Rubraca or PARP inhibitor in ATM mutated patients is not nearly as robust, it would have no possibility of impacting on the outcome of the trial for the BRCA mutated patients. So that's part one.

Part two is, you are right to effectively point out that we have not yet seen either a PSA response or a RECIST response in the ATM population in TRITON2. What we have seen is a relatively high proportion of patients who have long term stable disease, some degree of tumor reduction and some degree of a PSA response. But we have one patient who's been on drugs for 12 or 13 months and others who have crossed the six-month threshold. So we are going to continue to enroll ATM patients in TRITON2 and try to learn more and more about a population of ATM patients.

But we have not considered stopping enrolment of ATM patients in TRITON3 because we still think there could be a positive impact on progression free survival driven by the stable disease in the ATM population and PFS progression free survival is of course the primary endpoint of TRITON3. So more to come on that, but the trial as long as it's successful in the BRCA patients is protected from a negative outcome for the ATM patients.

Gena Wang

That’s very helpful. Thank you.

Patrick Mahaffy

You bet.


Your next question comes from the line of Peter Lawson with SunTrust Robinson. Your line is open. Please go ahead.

Peter Lawson

Hey Pat, did this quick step up you've seen in the need for free drug, what drove that? Do you think it's more of a class effect or do you think you've been hit more adversely by that?

Patrick Mahaffy

I think it's a class effect. I actually think that class effect goes beyond PARP inhibitors and the ovarian cancer setting, but to any solid tumor where funding for these foundations has been reduced. So I don't believe there's anything about our program that is more attractive to a prescriber than they would see for programs from either [indiscernible].

The growth I think relative to our earlier percentages particularly when we were in the treatment setting is a little bit about the patient characteristics. So when we were limited to the mutant BRCA treatment indication sadly many women with BRCA mutations present with ovarian cancer earlier in their lives than do the broader population of non-BRCA mutated patients.

And I think the consequence of going into this all-comers population has caused us to see a number of women who are Medicare eligible and a higher percentage of women who are Medicare eligible than when we been we were limited to the treatment only BRCA population.

Peter Lawson

Thank you. And then Patient, just on the departure of your Chief Commercial Officer kind of mid launch, I mean where are you in the process of finding a replacement and how anticipated was that?

Patrick Mahaffy

We have a search underway. We are absolutely confident that we will have a new person on board if not likely this quarter, but I would hope that early next year. It's a very attractive opportunity. I've been given, I've mentioned the great input I've been able to get from our new board members and I've reached out to them for suggestions of people that they might recommend for us to contact directly or through our recruiter, but that search effort is well underway.

Peter Lawson

And just going back to the supply of free drugs do you think it's also linked just to a number of companies that have a PARP inhibitor or that kind of creates an additional pressure there around who can supply free drugs?

Patrick Mahaffy

Well that's an interesting question. I know that, the way it worked is if physician will prescribe the drug and then an investigation will occur by a third party. If the patient applied for it and they are often recommended to do so as potentially being eligible for a free drug effectively. The concern any commercial group has is that if your company's program is less favorable than competitors, then the physician is just going to move to prescribing everybody an alternative drug because if a patient is more likely to get free drug from a different program then that's going to be an advantage in the eyes of the physician who clearly want to see their patient get access to a drug whether it's from a free program or commercially insured.

And so there is a general sense that we and I'm sure our competitors feel the same way, have to remain competitive because the concern is, if you aren't competitive with a free drug program you could not only impact your free drug supply but your general commercial supply. That pressure is probably greater in a world where there are competitors than where there is just one drug of a class approved for a given indication.

Peter Lawson

Got it. Okay, thanks for taking my questions.

Patrick Mahaffy

You bet.


Your next question comes from Joe Catanzaro with Piper Jaffray. Your line is open. Please go ahead.

Joe Catanzaro

Hey guys. Thanks for taking the question, just maybe one quick one from me. So you mentioned the continued tumor shrinkage for Rubraca and the maintenance as a potential key differentiator. I was just wondering if you could comment on how patients who complete chemotherapy but have residual disease are currently managed?

Patrick Mahaffy

They're all managed ineffectively the same way. So if a woman comes off her 4 to 6 cycles of the platinum and has achieved either a partial response or a complete response, physician then can make a choice about whether to do as we discussed here, put her on PARP inhibitor or go with watch and wait. If that woman is unable to tolerate that platinum based therapy or if it proves itself to be ineffective she would normally be rotated on to some alternative chemotherapy regimen to try to see if an alternative regimen would do a better job at shrinking the tumor.

This maintenance indication for the PARP of course is only about 15, 16 months old and as we noted here we as a community have struggled to get adequate uptake, for what we're trying to tell through this maintenance story is look you may not be seen this is the opportunity as maintenance alone to delay potentially a long period of time depending on the patient characteristics the initiation of other rounds of chemotherapy. But what you may like is the opportunity to tell a patient what normally when we just see a partial response we're happy because that represents sort of a stable disease and or better and we're going to give you watch and wait or a PARP inhibitor.

But I can give you a drug that not only will delay the initiation of chemo based on the progression free survival data from ATHENA 2 and the ARIEL3, but there is one drug that actually can further shrink your tumor which is a real advantage to a patient who doesn't like the idea of any residual tumor inside her after a tough bout of platinum based chemo. And so, we uniquely have the opportunity to tell a story that goes beyond just maintenance and I know it sounds a little bit corny, but remains enhanced which has actually deepened the response that she saw on her original platinum based therapy with the goal of either deepening that response or in certain cases actually converting it from a partial response to a complete response which effectively is the elimination of tumor.

Joe Catanzaro

Okay, got it. Maybe just one quick follow up, so you mentioned that currently is 10% off label use, so I'm wondering if you expect that number to change in light of the TRITON2 data presented at ESMO?

Patrick Mahaffy

I don't know. I will say that, where we do see off label use has been predominantly in either breast cancer or in pancreatic cancer and we do not to date - have not to date seen very much use in prostate. So if we do begin to see some use in prostate based on the tracking to data then I would expect that percentage of off label used to grow.

Joe Catanzaro

Okay, got it. Thanks for taking my questions.

Breanna Burkart

Amelia, time for about one more question please.


Your next question comes from the line of Michael Schmidt with Guggenheim. Your line is open. Please go ahead. Michael, your line is open. Please go ahead.

Michael Schmidt

Hey guys, sorry about that, and thanks for taking my question. I just had a follow up to the prior question and this is something that we've heard from KOLs more recently which is that some physicians in clinical practice apparently treat patients with chemotherapy to progression. So a patient that only achieves the PR with chemo is typically remains on chemotherapy until progression which is obviously not, how these drugs were studied in the maintenance setting. I was just wondering if that is something that you've been seeing in clinical practice, while marketing the drug and if that is something that physicians are receptive to switching to something like Rubraca if a patient has not achieved a CR following platinum chemotherapy.

Patrick Mahaffy

Yes, I’ll say a couple of things about that. We are aware of some KOLs or academic based clinicians who do feel that once a woman has recurrent ovarian cancer, she effectively needs to make a decision to be on therapy of some kind for the rest of her life. So these are physicians who have decided that watch and wait is not a good idea, that maintaining patients on chemo for as long as they can and if they progress on that chemo going to another round of chemo is a good idea. It's our opportunity and our responsibility to go to those physicians and say look, we get it that you want to maintain a constant treatment approach to these patients that's far better for that patient to come off chemo which is really hard.

And so, when you're talking about chemo which normally is scheduled for four to six cycles when you're talking about chronically delivering platinum based chemotherapy, you are talking about a very fit younger woman who can tolerate that. It's not easy, so well yes that has been pursued in academic settings for fit younger patients.

I think, we have every opportunity based on our data and there aren't data for chemo in this setting, look you take it right after you get to a partial response some four to six cycles go on a PARP inhibitor. Its far better tolerated than a platinum based double or even a platinum or taxane-based therapy and you have that opportunity to re-treat later with the platinum with the taxane or some alternative chemo. I do not believe this is a standard practice in the community based setting. This would be more aggressive academic centers.

Breanna Burkart

Thank you for your time everyone. We appreciate your interest. If you have any follow up questions please call me at 303-625-5023 or Anna at 303-625-5022. The call will be available via a replay of our webcast, beginning in about one hour and we'll be available for 30 days. Again, thank you for your interest and time and have a good evening.


This concludes today's conference call. You may now disconnect. Have a great day.