CAPScall of the Week: Clovis Oncology Inc (CLVS)

The call
After carefully reviewing Clovis Oncology Inc (NASDAQ:CLVS)’s prospects, I’ve decided to place a CAPScall of underperform on the company for a number of reasons.

The primary reason for my distaste of this recent run relates to its complete failure with CO-101 for metastatic pancreatic cancer. The results from the phase 1/2 trial were noted by CEO Patrick Mahaffy to be “even more ambiguous than we could have imagined,” as CO-101 was shown to have no more effect on overall survival than Eli Lilly & Co. (NYSE:LLY)‘s Gemzar. Then, as if to run salt in the wounds, we learned just days apart that Celgene Corporation (NASDAQ:CELG)‘s Abraxane when combined with Lilly’s Gemzar did extend median overall survival as compared to just taking Gemzar alone. CO-101 was a monumental failure that brought into question Clovis’ ability to analyze a compound and also completely wiped out its most advanced drug.

Now, some of you might feel more confident with Clovis Oncology Inc (NASDAQ:CLVS) sporting two leading candidates in CO-1686 and Rucaparib. I’m not saying anything specifically against either drug candidate, but since it discontinuted CO-101 it’s burned through more precious cash and it’s added what I’d estimate is another six months to a year onto its timetable of when it’ll have an FDA-approved drug on the market. Yet, in that time, the share price has practically doubled?! That makes somewhere between little and no sense to me!

Another factor that turns me off is Afatinib’s gigantic head start in EGFR mutation-positive NSCLC. In trials, those patients receiving Afatinib demonstrated a marked improvement in progression-free survival to 11.1 months compared to just 6.9 months for the pemetrexed/cisplatin combination in the control arm. CO-1686 might be yesterday’s news before it even becomes today’s news!

With a steady cash burn and a shaky pipeline, Clovis appears destined to head lower.

The article CAPScall of the Week: Clovis Oncology originally appeared on Fool.com and is written by Sean Williams.

Fool contributor Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.

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