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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.
For the fiscal year ended December 31, 2020.
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.
For the transition period from to .
Commission file number: 001-35347
Clovis Oncology, Inc.
(Exact name of Registrant as specified in its charter)
Delaware
(State or other jurisdiction of
incorporation or organization)
5500 Flatiron Parkway, Suite 100
Boulder, Colorado
(Address of principal executive offices)
90-0475355
(I.R.S. Employer
Identification No.)
80301
(Zip Code)
(303) 625-5000
(Registrant’s telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act
Title of Each Class
Common Stock par Value $0.001 per share
Trading Symbol(s)
CLVS
Name of each exchange on which registered
The NASDAQ Global Select Market
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ⌧
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ⌧
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes ⌧ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of
Regulation S-T (§ 232.405) of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such
files). Yes ⌧ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an
emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company, and “emerging growth company” in
Rule 12b-2 of the Exchange Act.
Large accelerated filer
Non-accelerated filer
☐
☐
☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or
Accelerated filer
Smaller reporting company
Emerging growth company
⌧
☐
revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control
over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its
audit report. ⌧
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ⌧
The aggregate market value of the registrant’s common stock, par value $0.001 per share, held by non-affiliates of the registrant on June 30, 2020, the last
business day of the registrant’s most recently completed second quarter, was $578,173,019 based on the closing price of the registrant’s common stock on the
NASDAQ Global Select Market on that date of $6.75 per share.
The number of outstanding shares of the registrant’s common stock, par value $0.001 per share, as of February 12, 2021 was 104,529,652.
DOCUMENTS INCORPORATED BY REFERENCE Portions of the registrant’s definitive proxy statement to be filed with the Securities and Exchange
Commission pursuant to Regulation 14A in connection with the registrant’s 2021 Annual Meeting of Stockholders, which is to be filed within 120 days after the
end of the registrant’s fiscal year ended December 31, 2020, are incorporated by reference into Part III of this Annual Report on Form 10-K to the extent stated
therein.
Table of Contents
TABLE OF CONTENTS
BUSINESS
PART I
ITEM 1.
ITEM 1A. RISK FACTORS
ITEM 1B. UNRESOLVED STAFF COMMENTS
ITEM 2.
ITEM 3.
ITEM 4.
PART II
ITEM 5.
PROPERTIES
LEGAL PROCEEDINGS
MINE SAFETY DISCLOSURES
ITEM 6.
ITEM 7.
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
ISSUER PURCHASES OF EQUITY SECURITIES
SELECTED FINANCIAL DATA
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
ITEM 8.
ITEM 9.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
ITEM 9A. CONTROLS AND PROCEDURES
ITEM 9B. OTHER INFORMATION
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
ITEM 11.
ITEM 12.
EXECUTIVE COMPENSATION
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
ITEM 14.
PART IV
ITEM 15.
PRINCIPAL ACCOUNTING FEES AND SERVICES
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
SIGNATURES
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PART I
This Annual Report filed on Form 10-K and the information incorporated herein by reference includes statements that are, or
may be deemed, “forward-looking statements.” In some cases, these forward-looking statements can be identified by the use of
forward-looking terminology, including the terms “believes,” “estimates,” “anticipates,” “expects,” “plans,” “intends,”
“may,” “could,” “might,” “will,” “should,” “approximately” or, in each case, their negative or other variations thereon or
comparable terminology, although not all forward-looking statements contain these words. They appear in a number of places
throughout this Annual Report on Form 10-K and include statements regarding our intentions, beliefs, projections, outlook,
analyses or current expectations concerning, among other things, the market acceptance and commercial viability of our
approved product, the development and performance of our sales and marketing capabilities, the performance of our clinical
trial partners, third party manufacturers and our diagnostic partners, our ongoing and planned non-clinical studies and clinical
trials, the timing of and our ability to make regulatory filings and obtain and maintain regulatory approvals for our product
candidates, including our ability to confirm clinical benefit and safety of our approved product through confirmatory trials and
other post-marketing requirements, the degree of clinical utility of our products, particularly in specific patient populations,
expectations regarding clinical trial data, expectations regarding sales of our products, our results of operations, financial
condition, liquidity, prospects, growth and strategies, the industry in which we operate, including our competition and the trends
that may affect the industry or us.
By their nature, forward-looking statements involve risks and uncertainties because they relate to events, competitive
dynamics and industry change and depend on the economic circumstances that may or may not occur in the future or may occur
on longer or shorter timelines than anticipated. We caution you that forward-looking statements are not guarantees of future
performance and that our actual results of operations, financial condition and liquidity and the development of the industry in
which we operate may differ materially from the forward-looking statements contained herein.
Any forward-looking statements that we make in this Annual Report on Form 10-K speak only as of the date of such statement,
and we undertake no obligation to update such statements to reflect events or circumstances after the date of this Annual Report
on Form 10-K or to reflect the occurrence of unanticipated events.
You should also read carefully the factors described in the “Risk Factors” section of this Annual Report on Form 10-K to
better understand the risks and uncertainties inherent in our business and underlying any forward-looking statements. You are
advised, however, to consult any further disclosures we make on related subjects in our Quarterly Reports on Form 10-Q,
Current Reports on Form 8-K and our website.
Clovis Oncology®, the Clovis logo and Rubraca® are trademarks of Clovis Oncology, Inc. in the United States and in other
selected countries. All other brand names or trademarks appearing in this report are the property of their respective holders.
Unless the context requires otherwise, references in this report to “Clovis,” the “Company,” “we,” “us” and “our” refer to
Clovis Oncology, Inc., together with its consolidated subsidiaries.
ITEM 1.
BUSINESS
Overview
We are a biopharmaceutical company focused on acquiring, developing and commercializing innovative anti-cancer agents in
the United States, Europe and additional international markets. We target our development programs for the treatment of specific
subsets of cancer populations, and simultaneously develop, with partners, for those indications that require them, diagnostic tools
intended to direct a compound in development to the population that is most likely to benefit from its use.
Our marketed product Rubraca® (rucaparib), an oral small molecule inhibitor of poly ADP-ribose polymerase (“PARP”), is
marketed in the United States for two indications specific to recurrent epithelial ovarian, fallopian tube or primary peritoneal
cancer and also an indication specific to metastatic castration-resistant prostate cancer (“mCRPC”). The initial indication
received approval from the United States Food and Drug Administration (“FDA”) in December 2016 and covers the treatment of
adult patients with deleterious BRCA (human genes associated with the repair of damaged DNA) mutation (germline and/or
somatic)-associated epithelial ovarian, fallopian tube, or primary peritoneal cancer who have been treated with two or more
chemotherapies and selected for therapy based on an FDA-approved
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companion diagnostic for Rubraca. In April 2018, the FDA also approved Rubraca for the maintenance treatment of adult
patients with recurrent epithelial ovarian, fallopian tube, or primary peritoneal cancer who are in a complete or partial response to
platinum-based chemotherapy. The approval in this second, broader and earlier-line indication on a priority review timeline was
based on positive data from the phase 3 ARIEL3 clinical trial. Diagnostic testing is not required for patients to be prescribed
Rubraca in this maintenance treatment indication.
In May 2020, the FDA approved Rubraca for the treatment of adult patients with mCRPC associated with a deleterious BRCA
mutation (germline and/or somatic) who have been treated previously with androgen receptor-directed therapy and a taxane-
based chemotherapy. The FDA approved this third indication under accelerated approval based on objective response rate and
duration of response data from the TRITON2 clinical trial. We launched Rubraca for this indication in the U.S. following receipt
of the approval. As an accelerated approval, continued approval for this indication may be contingent upon verification and
description of clinical benefit in confirmatory trials. The TRITON3 clinical trial is expected to serve as the confirmatory study
for Rubraca’s approval in mCRPC. In August 2020, the FDA approved the use of Foundation Medicine’s blood-based diagnostic
test, FoundationOne Liquid CDx, as a companion diagnostic for the detection of deleterious BRCA mutation (germline and/or
somatic) to select mCRPC patients for treatment with Rubraca.
In Europe, the European Commission granted a conditional marketing authorization in May 2018 for Rubraca as monotherapy
treatment of adult patients with platinum-sensitive, relapsed or progressive, BRCA mutated (germline and/or somatic), high-grade
epithelial ovarian, fallopian tube, or primary peritoneal cancer, who have been treated with two or more prior lines of platinum-
based chemotherapy, and who are unable to tolerate further platinum-based chemotherapy. In January 2019, the European
Commission granted a variation to the marketing authorization to include the maintenance treatment of adult patients with
recurrent epithelial ovarian, fallopian tube, or primary peritoneal cancer who are in a complete or partial response to platinum-
based chemotherapy. With this approval, Rubraca is authorized in Europe for certain patients in the recurrent ovarian cancer
maintenance setting regardless of their BRCA mutation status. Following successful reimbursement negotiations, Rubraca has
been launched in each of Germany, United Kingdom, Italy, France, Spain and the Netherlands, and reimbursement is pending in
Switzerland.
In December 2020, Rubraca met the primary study endpoint of significantly improving progression-free survival (“PFS”)
versus chemotherapy in the ARIEL4 confirmatory study. An interim analysis of overall survival, a secondary endpoint in the
study in which 51% of events had occurred in the intent-to-treat population, showed a trend toward an overall survival advantage
in the chemotherapy arm, but was confounded by the high rate (64%) of per-protocol crossover to Rubraca following progression
on chemotherapy. Additional ARIEL4 study results are expected to be submitted for presentation at a medical congress meeting
in 2021. ARIEL4 is a Phase 3 multicenter, randomized study of Rubraca versus chemotherapy, which enrolled relapsed ovarian
cancer patients with BRCA mutations (inclusive of germline and/or somatic) who had received two or more prior lines of
chemotherapy. Completion of ARIEL4 is a post-marketing commitment in the U.S. and Europe.
Beyond our labeled indications, we have a clinical development program underway to further evaluate Rubraca in a variety of
solid tumor types, either as monotherapy or in combination with other agents, including several studies as part of our ongoing
clinical collaboration with Bristol Myers Squibb Company (“Bristol Myers Squibb”) to evaluate its immunotherapy
Opdivo® (nivolumab) in combination with Rubraca. We anticipate initial data of Rubraca monotherapy versus placebo from our
ATHENA study in the second half of 2021, with the results of Rubraca versus Opdivo in all study populations a year or more
later. However, the timing of the ATHENA data readouts is dependent on the timing of data maturity driven by PFS events.
We initiated the Phase 2 LODESTAR study in December 2019 to evaluate Rubraca as monotherapy treatment in patients with
recurrent solid tumors associated with a deleterious mutation in homologous recombination repair genes. Based on our
interactions with the FDA, we believe that this study may be registration-enabling for a targeted gene- and tumor-agnostic label,
if data from the trial support the potential for an accelerated approval. Assuming enrollment in this study continues as planned,
and subject to the data, we may potentially file a supplemental New Drug Application (“sNDA”) with the FDA for this indication
in the second half of 2021 or the first half of 2022.
We hold worldwide rights to Rubraca.
Pursuant to our license and collaboration agreement with 3B Pharmaceuticals GmbH (“3BP”), entered into in September
2019, we have initiated development of a peptide-targeted radionuclide therapy (“PTRT”) and imaging agent
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targeting fibroblast-activating protein (“FAP”). We have completed sufficient preclinical work to support an investigational new
drug application (“IND”) for the lead candidate under our license and collaboration agreement, designated internally as FAP-
2286. Accordingly, we submitted two INDs for FAP-2286 for use as imaging and treatment agents in December 2020 to support
an initial Phase 1 study to determine the dose and tolerability of FAP-2286 as a therapeutic agent with expansion cohorts planned
in multiple tumor types as part of a global development program. The INDs are expected to become effective following receipt
and submission, and acceptance by the FDA, of satisfactory chemistry, manufacturing and controls (“CMC”) data for the
imaging agent from clinical sites. The FAP-targeting imaging agent will be utilized to identify tumors that contain FAP for
treatment in the Phase 1 LuMIERE clinical study, which we anticipate initiating in the first half of 2021.
In addition to our planned studies, the University of California San Francisco is sponsoring a separate, investigator-initiated,
imaging-only study with gallium-68 labeled FAP-2286 (NCT04621435) to evaluate FAP expression in multiple tumor types;
their study is currently recruiting. We hold U.S. and global rights to FAP-2286, excluding Europe (defined to include Russia,
Turkey and Israel), where 3BP retains rights. We are also collaborating with 3BP on a discovery program directed to up to three
additional, undisclosed targets for targeted radionuclide therapy, to which we would obtain global rights for any resulting product
candidates.
Lucitanib, our second product candidate currently in clinical development, is an investigational, oral, potent angiogenesis
inhibitor which inhibits vascular endothelial growth factor receptors 1 through 3 (“VEGFR1-3”), platelet-derived growth factor
receptors alpha and beta (“PDGFR α/β”) and fibroblast growth factor receptors 1 through 3 (“FGFR1-3”). Lucitanib inhibits the
same three pathways as Lenvima® (lenvatinib), which has received an FDA approval for use in endometrial cancer in
combination with Keytruda® (pembrolizumab), a PD-1 inhibitor. This, together with preclinical data for lucitanib in combination
with a PD-1 inhibitor that demonstrated enhanced anti-tumor activity compared to that of single agents, represent a scientific
rationale for development of lucitanib in combination with a PD-1 inhibitor, and in February 2019, lucitanib was added to our
clinical collaboration with Bristol Myers Squibb. The Clovis-sponsored LIO-1 study of lucitanib in combination with nivolumab
in advanced solid tumors and gynecologic cancers is currently enrolling patients in the Phase 2 part of the study. We expect to
present interim data from this study at medical meetings in 2021, which are expected to include interim results from the ovarian
and endometrial cancer expansion cohorts. We hold the global (excluding China) development and commercialization rights for
lucitanib.
Clovis was founded in 2009. We have built our organization to support innovative oncology drug development for the
treatment of specific subsets of cancer populations. To implement our strategy, we have assembled an experienced team with
core competencies in global clinical and non-clinical development, regulatory operations and commercialization in oncology, as
well as establishing collaborative relationships with companies specializing in companion diagnostic development.
Clinical Development Pipeline
We continue to evaluate the use of Rubraca for selected patient populations and, where appropriate, collaborate with partners
for companion diagnostic development. We have focused our development strategy for Rubraca on indications where we believe
patient populations exhibit higher frequencies of mutant BRCA tumors or tumors with other homologous recombination
deficiencies (“HRD”), where PARP inhibitors have demonstrated clinical or pre-clinical activity in tumors. We are also
developing lucitanib in combinations, including with Rubraca, based on encouraging data in clinical studies of other similar
oncology compounds. FAP-2286 is currently the subject of IND-enabling preclinical studies and we submitted two INDs in
December 2020. The following table summarizes the principal ongoing or planned Clovis- or collaborator-sponsored studies:
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In certain of these trials, we or our collaborators may have access to interim data on a periodic or continuing basis that will not
be made available publicly on the same timeframe as such data becomes available to us, or at all.
Rubraca – a PARP Inhibitor
Overview
Rubraca is an oral, small molecule inhibitor of PARP1, PARP2 and PARP3. We in-licensed Rubraca from Pfizer, Inc. in June
2011 and hold exclusive worldwide rights. Rubraca has received regulatory approvals in the United States and Europe for
patients with recurrent epithelial ovarian, fallopian tube or primary peritoneal cancer. Rubraca also received regulatory approval
in the United States as a monotherapy treatment of adult patients with BRCA1/2-mutant recurrent, metastatic castrate-resistant
prostate cancer.
In the United States, Rubraca is approved by the FDA for the treatment of adult patients with deleterious BRCA mutation
(germline and/or somatic)-associated epithelial ovarian, fallopian tube, or primary peritoneal cancer who have been treated with
two or more chemotherapies and selected for therapy based on an FDA-approved companion diagnostic for Rubraca. BRCA
mutations are believed to occur in approximately 25% of women with ovarian cancer. In April 2018, the FDA granted a second
approval for Rubraca for the maintenance treatment of adult patients with recurrent epithelial ovarian, fallopian tube, or primary
peritoneal cancer who are in a complete or partial response to platinum-based chemotherapy, a broader and earlier-line
indication. Diagnostic testing is not required for patients to be prescribed Rubraca in this maintenance treatment indication.
In the United States, Rubraca is approved for the treatment of adult patients with mCRPC associated with a deleterious BRCA
mutation (germline and/or somatic) who have been treated previously with androgen receptor-directed therapy and a taxane-
based chemotherapy. The FDA approved this indication in May 2020 under accelerated approval based on objective response
rate and duration of response data from the TRITON2 clinical trial. We launched Rubraca for this indication in the U.S.
following receipt of the approval. As an accelerated approval, continued approval
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for this indication may be contingent upon verification and description of clinical benefit in confirmatory trials. The TRITON3
clinical trial is expected to serve as the confirmatory study for Rubraca’s approval in mCRPC. In August 2020, the FDA
approved the use of Foundation Medicine’s blood-based diagnostic test, FoundationOne Liquid CDx, as a companion diagnostic
for the detection of deleterious BRCA mutation (germline and/or somatic) to select mCRPC patients for treatment with Rubraca.
In Europe, Rubraca is authorized for the maintenance treatment of adult patients with recurrent epithelial ovarian, fallopian
tube, or primary peritoneal cancer who are in a complete or partial response to platinum-based chemotherapy regardless of their
BRCA mutation status. Following successful reimbursement negotiations, Rubraca has been launched in each of Germany,
United Kingdom, Italy, France, Spain and the Netherlands, and reimbursement is pending in Switzerland.
The Role of PARP Inhibition in Cancer Therapy
Cells in the human body are under constant attack from agents that can cause damage to DNA, including sunlight and other
forms of radiation, as well as DNA-binding chemicals that can cause changes in the composition of DNA. Cells have evolved
multiple mechanisms to enable such DNA repair, and these mechanisms are complementary to each other, each driving repair of
specific types of DNA damage. If a cell’s DNA damage repair system is overwhelmed, then the cell will die undergoing a form
of suicide termed apoptosis. A fundamental principle of cancer therapy is to damage cells profoundly with radiation or DNA-
binding drugs, such as alkylating agents or platinums, to induce apoptosis, and thus cancer cell death. Multiple DNA repair
mechanisms active in the cell may reduce the activity of these anti-cancer therapies.
The PARP family comprises 17 structurally related proteins that have been identified on the basis of sequence similarity.
PARP1, PARP2, and PARP3 play a central role in DNA repair. They are rapidly recruited to the sites of DNA damage and
catalyze the recruitment of additional proteins that initiate the repair of damaged DNA. The breast cancer 1 (“BRCA1”) and
breast cancer 2 (“BRCA2”) genes also have important roles in DNA repair pathways such as homologous recombination.
According to the National Cancer Institute, BRCA1 and BRCA2 mutations are associated with an increased risk of ovarian,
breast, prostate, and pancreatic cancers.
Rubraca is an inhibitor of PARP enzymes, including PARP1, PARP2, and PARP3. PARP inhibitors have shown activity in
BRCA1/2 mutant and homologous recombination (“HR”) repair deficient cancer cell lines through a mechanism known as
synthetic lethality in which the loss of two genes/pathways is required for cell death. The inhibition/inactivation of repair
pathways by administration of a PARP inhibitor in the context of an underlying genetic defect such as a BRCA mutation results
in tumor cell death through accumulation of unrepaired DNA damage.
Alterations in DNA repair genes other than BRCA1/2 have been observed in, and contribute to the hereditary risk of, ovarian,
breast, prostate and pancreatic cancers. PARP inhibitors have shown evidence of nonclinical and clinical activity in tumors with
alterations in non-BRCA HR genes. DNA repair deficiencies resulting from genetic and epigenetic alterations can result in a
“BRCA-like” phenotype that may also render tumor cells sensitive to PARP inhibitors. One approach to identify patients with
DNA repair deficiencies due to mechanisms other than a mutation in BRCA or other non-BRCA HR genes is to assess loss of
heterozygosity (“LOH”), or the loss of one normal copy of a gene, which arises from error-prone DNA repair pathways when HR
is compromised.
On the basis of these scientific observations, we initially developed Rubraca in ovarian cancer patients with tumors having
BRCA mutations or other HRD. These molecular markers also may be used to select patients with other tumors for treatment with
Rubraca. Thus, in addition to ovarian trials, studies open for enrollment or under consideration to further evaluate Rubraca, either
alone or in combination with other agents, include prostate, breast, pancreatic, bladder and gastroesophageal cancers.
Ovarian cancer
According to the American Cancer Society, an estimated more than 21,000 women will be diagnosed with ovarian cancer in
the United States and there will be an estimated nearly 14,000 deaths from ovarian cancer in 2021, and according to
GLOBOCAN in 2020, an estimated 66,000 women in Europe are diagnosed each year with ovarian cancer, and ovarian cancer is
among those cancers with the highest rate of deaths. According to the American Cancer Society, more than 75% of women are
diagnosed with ovarian cancer at an advanced stage, and patients who are diagnosed with
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advanced ovarian cancer have a 70-95% chance of recurrence according to the Ovarian Cancer Research Alliance. According to a
Clinical Cancer Research 2010 publication, up to 60% of patients with ovarian cancer may be HR-deficient.
Rubraca’s approvals in the U.S. and Europe in the recurrent BRCA mutant ovarian cancer treatment setting were based on data
from two multicenter, single-arm, open-label clinical trials, Study 10 (NCT01482715) and ARIEL2 (NCT01891344), in women
with advanced BRCA-mutant ovarian cancer who had progressed after two or more prior chemotherapies. All patients received
Rubraca orally 600 mg twice daily as monotherapy. Treatment continued until disease progression or unacceptable toxicity. The
primary efficacy outcome measure of both studies was objective response rate (ORR) as assessed by the investigator according to
Response Evaluation Criteria in Solid Tumors (“RECIST”) version 1.1. Results from a blinded independent radiology review
(“BICR”) were consistent.
The efficacy of Rubraca in the ovarian cancer maintenance treatment setting was investigated in ARIEL3 (NCT01968213), a
double-blind, multicenter clinical trial in which 564 patients with recurrent epithelial ovarian, fallopian tube, or primary
peritoneal cancer who were in response to platinum-based chemotherapy were randomized (2:1) to receive Rubraca tablets 600
mg orally twice daily (n=375) or placebo (n=189). Treatment was continued until disease progression or unacceptable toxicity.
All patients had achieved a response (complete or partial) to their most recent platinum-based chemotherapy. Randomization was
stratified by best response to last platinum (complete or partial), time to progression following the penultimate platinum therapy
(6 to < 12 months and ≥ 12 months), and tumor biomarker status. The major efficacy outcome was investigator-assessed PFS
evaluated according to RECISTv1.1.
The primary efficacy analysis evaluated three prospectively defined molecular sub-groups in a step-down manner: 1) tumor
BRCA mutant (“tBRCAmut”) patients, inclusive of germline and somatic BRCA mutations (n=196); 2) HRD patients, including
tBRCAmut patients and BRCA wild-type with high LOH (n=354), and, finally, 3) the intent-to-treat population, or all patients
treated in ARIEL3 (n=564). ARIEL3 demonstrated a statistically significant improvement in PFS for patients randomized to
Rubraca as compared with placebo in all patients, and in the HRD and tBRCAmut subgroups. Median PFS in the tBRCAmut
patients was 16.6 months (95% CI: 13.4–22.9) in the Rubraca group (n=130) versus 5.4 months (95% CI: 3.4–6.7) in the placebo
group (n=66) (Hazard Ratio, or HR: 0.23 [95% CI: 0.16–0.34]; p<0.0001). Median PFS in the HRD patients was 13.6 months
(95% CI: 10.9–16.2) in the Rubraca group (n=236) versus 5.4 months (95% CI: 5.1–5.6) in the placebo group (n=118) (HR: 0.32
[95% CI: 0.24–0.42]; p<0·0001). Median PFS in the intent-to-treat population was 10.8 months (95% CI: 8.3–11.4) in the
Rubraca group (n=375) versus 5.4 months (95% CI: 5.3–5.5) in the placebo group (n=189) (HR: 0.36 [95% CI: 0.30–0.45];
p<0·0001). An exploratory analysis in the HRD/BRCA wild-type population demonstrated a median PFS of 9.7 months (95% CI:
7.9–13.1) in the Rubraca group (n=106) versus 5.4 months (95% CI: 4.1–5.7) in the placebo group (n=52) (HR: 0.44 [95% CI:
0.29–0.66]); p<0.0001).
BICR results were consistent. In a pre-specified analysis of the key stand-alone secondary endpoint of progression-free
survival assessed by BICR, PFS was also improved in the Rubraca group compared with placebo in all three populations. Median
PFS in the tBRCAmut patients was 26.8 months (95% CI: 19.2 to not reached) in the Rubraca group versus 5.4 months (95% CI:
4.9–8.1) in the placebo group (HR: 0.20 [95% CI: 0.13–0.32]; p<0.0001). Median PFS in the HRD patients was 22.9 months
(95% CI: 16.2 to not reported) in the Rubraca group versus 5.5 months (95% CI: 5.1–7.4) in the placebo group (HR: 0.34 [95%
CI: 0.24–0.47]; p<0.0001). Median PFS in the intent-to-treat population was 13.7 months (95% CI: 11.0–19.1) versus 5.4 months
(95% CI: 5.1–5.5) in the placebo group (HR: 0.35 [0.28–0.45]; p<0.0001). An exploratory analysis in the HRD/BRCA wild-type
population demonstrated a median PFS of 11.1 months (95% CI: 8.2-NR) in the Rubraca group (n=106) versus 5.6 months (95%
CI: 2.9–8.2) in the placebo group (n=52) (HR: 0.55 [95% CI: 0.35–0.89]; p=0.0135).
Enrollment in ARIEL3 included one-third of patients who had achieved a complete response to their prior platinum-based
therapy, and two-thirds of patients who had achieved a partial response to their prior platinum-based therapy. Of those with a
partial response, 37% had measurable disease at the time of enrollment and were therefore evaluable for response. The confirmed
overall response rate by investigator-assessed RECISTv1.1 in the tBRCAmut group treated with Rubraca was 37.5% (15/40), of
these, 17.5% (7/40) were complete responses. This compared with 9% (2/23) in the placebo group (p=0.0055). No complete
responses were seen in the tBRCAmut placebo group. RECIST responses were also observed in BRCA wild-type HRD-positive
and BRCA wild-type HRD-negative subgroups. In a subsequent post hoc exploratory analysis of ARIEL3 data, a higher response
rate was also seen in patients without measurable disease in both the tBRCAmut group and the intent to treat population
(inclusive of BRCAmut patients) as compared to placebo. RECIST responses were not assessed by independent blinded review.
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Safety data from ARIEL3 demonstrated consistency with prior Rubraca studies. Treatment emergent adverse events
(“TEAEs”) in the ARIEL3 Rubraca group were generally managed with dose modifications and not associated with increased
mortality or morbidity compared with the placebo group. The most common (occurring in ≥5% of patients) TEAEs of grade ≥3
reported in patients treated with Rubraca in the ARIEL3 study were anemia/decreased hemoglobin (21%), increase in ALT/AST
(10%), neutropenia (7%), asthenia/fatigue (7%) and thrombocytopenia (5%). The discontinuation rate for TEAEs (excluding
disease progression) was 15% for Rubraca-treated patients and 2% for the placebo arm. In ARIEL3, the rate of treatment-
emergent myelodysplastic syndrome (“MDS”)/acute myeloid leukemia (“AML”) in the Rubraca arm was <1% (3/372), and no
patients on the placebo arm experienced treatment-emergent MDS/AML. In approximately 1,100 patients treated with Rubraca,
MDS/AML occurred in 10 patients (0.9%), including those in long term follow-up. Of these, 5 occurred during treatment or
during the 28-day safety follow-up (0.5%). The duration of Rubraca treatment prior to the diagnosis of MDS/AML ranged from 1
month to approximately 28 months. The cases were typical of secondary MDS/cancer therapy-related AML; in all cases, patients
had received previous platinum containing chemotherapy regimens and/or other DNA damaging agents.
At the time of the analysis of PFS, overall survival (OS) data were not mature (with 22% of events). The comprehensive
dataset for ARIEL3 was presented at the 2017 European Society of Medical Oncology (“ESMO”) Congress in early September
2017 and subsequently published in The Lancet. The ARIEL3 dataset formed the basis for sNDA filed with the FDA as well as
the marketing authorization variation filed with the EMA supporting the approval of Rubraca in the US in April 2018 and Europe
in January 2019 respectively, as maintenance treatment in adult patients with recurrent epithelial ovarian, fallopian tube, or
primary peritoneal cancer who are in a complete or partial response to platinum-based chemotherapy.
The ARIEL4 confirmatory study (NCT 02855944) is a Phase 3 multicenter, randomized study of Rubraca versus
chemotherapy, which enrolled relapsed ovarian cancer patients with BRCA mutations (inclusive of germline and/or somatic) who
had received two or more prior lines of chemotherapy. The primary endpoint of the study is investigator-assessed progression-
free survival (“InvPFS”), with a step-down analysis from the efficacy population (if significant) to the intent to treat (“ITT”)
population. The efficacy population comprised the group of patients with a deleterious tumor BRCA mutation and excluded those
with a BRCA reversion mutation as determined by a blood test. Development of reversion mutations that restore BRCA protein
function are associated with resistance to platinum-based chemotherapies and PARP inhibitors in BRCA-mutant cancers, and
these occur more frequently in platinum-resistant vs platinum-sensitive patients (13% and 2% respectively in the ARIEL2 study).
In December 2020, Rubraca met the primary study endpoint of significantly improving InvPFS versus chemotherapy. Patients
with a BRCA reversion mutation represented 7% of patients enrolled in the study and as anticipated, InvPFS results for those
patients showed limited benefit from Rubraca therapy. An interim analysis of overall survival, a secondary endpoint in the study
in which 51% of events had occurred in the intent-to-treat population, showed a trend toward an overall survival advantage in the
chemotherapy arm, but was confounded by the high rate (64%) of per-protocol crossover to Rubraca following progression on
chemotherapy. An analysis of the ITT population of patients showed a trend toward an OS advantage for those patients who
received Rubraca at any point in the trial versus those who did not. Additional ARIEL4 study results are expected to be submitted
for presentation at a medical congress meeting in 2021. Completion of ARIEL4 is a post-marketing commitment in the U.S. and
Europe.
Prostate cancer
The American Cancer Society estimates that approximately 248,000 men in the United States will be diagnosed with prostate
cancer in 2021, and the GLOBOCAN Cancer Fact Sheets estimated that approximately 473,000 men in Europe were diagnosed
with prostate cancer in 2020. Castrate-resistant prostate cancer has a high likelihood of developing metastases. Metastatic
castrate-resistant prostate cancer (“mCRPC”) is an incurable disease, usually associated with poor prognosis. Approximately
43,000 men in the U.S. are expected to be diagnosed with mCRPC in 2020. According to the American Cancer Society, the five-
year survival rate for mCRPC is approximately 30%. A number of publications have reported germline or somatic mutations in
BRCA1 or BRCA2 are approximately 12% in mCRPC according to an article published in JCO Precision Oncology in 2017.
These molecular markers may be used to select patients for treatment with a PARP inhibitor.
The TRITON (Trial of Rucaparib in Prostate Indications) program in prostate cancer initiated in the second half of 2016, and
currently includes two Clovis-sponsored studies. Enrollment is complete for TRITON2; TRITON3 continues to enroll patients.
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The TRITON2 study (NCT02952534) is a multicenter Phase 2 single-arm study of Rubraca in men with mCRPC that enrolled
patients with BRCA mutations (inclusive of germline and/or somatic) or other deleterious mutations in other homologous
recombination repair genes. Patients in the TRITON2 study have received prior treatment with at least one androgen receptor
(“AR”)-directed therapy and one previous line of taxane-based chemotherapy and were screened for a deleterious germline or
somatic mutation in BRCA1, BRCA2 or one of 13 other pre-specified homologous recombination (“HR”) genes. Study
participants were allocated into three cohorts based on the type of gene mutation and disease status, as determined by genomic
sequencing and RECIST criteria, respectively. Each cohort receives 600 mg Rubraca twice daily and are grouped based on the
following criteria: A) mutation in either BRCA1, BRCA2 or ATM genes, with tumors that can be measured with visceral and/or
nodal disease; B) mutation in either BRCA1, BRCA2 or ATM genes, with tumors that cannot be measured with visceral and/or
nodal disease, or C) mutation in another HR gene associated with sensitivity to PARP inhibition, with or without measurable
disease. The primary study endpoints include confirmed ORR and duration of response (“DOR”) per modified RECIST
v.1.1/PCWG3 criteria assessed by BICR in patients with measurable disease at baseline by independent review and PSA
response in patients with no measurable disease at baseline. Secondary endpoints include overall survival (“OS”), clinical benefit
rate, and safety and tolerability.
Efficacy and safety data from TRITON2 formed the basis of a sNDA that was submitted to FDA in late 2019. Evaluable
patient populations in the sNDA dataset included the following: 62 RECIST-evaluable patients with a BRCA (germline and/or
somatic) mutation and measurable disease (BICR); 115 patients with a BRCA (germline and/or somatic) mutation and
measurable or non-measurable disease; and 209 patients with HRD-positive mCRPC. The RECIST-evaluable patient population
demonstrated a 44% ORR (N=62; 95% CI 31, 57) by BICR. Objective response rates were similar for patients with a germline
BRCA versus somatic BRCA mutation. Median DOR was not evaluable at data cut-off. Additionally, a 55% confirmed PSA
response rate (95% CI 45, 64) was observed in an analysis of 115 patients with a deleterious BRCA mutation (germline and/or
somatic) and measurable or non-measurable disease.
TRITON2 evaluated the safety of Rubraca 600 mg twice daily as monotherapy treatment in the 209 patients with HRD-
positive mCRPC enrolled in the study, including the 115 with BRCA-mutated mCRPC. The most common adverse reactions
(greater than or equal to 20% of patients; CTCAE Grade 1-4) occurring in the BRCA mutant population (n=115) were
asthenia/fatigue, nausea, anemia, ALT/AST increased, decreased appetite, constipation, rash, thrombocytopenia, vomiting, and
diarrhea. The most common laboratory abnormalities (greater than or equal to 35% of patients; CTCAE Grade 1-4) were increase
in ALT, decrease in leukocytes, decrease in phosphate, decrease in absolute neutrophil count, decrease in hemoglobin, increase in
alkaline phosphatase, increase in creatinine, increase in triglycerides, decrease in lymphocytes, decrease in platelets, and decrease
in sodium.
In May 2020, the FDA approved Rubraca for the treatment of adult patients with mCRPC associated with a deleterious BRCA
mutation (germline and/or somatic) who have been treated previously with androgen receptor-directed therapy and a taxane-
based chemotherapy. The FDA approved this indication under accelerated approval based on objective response rate and duration
of response data from the TRITON2 clinical trial. We launched Rubraca for this indication in the U.S. following receipt of the
approval. As an accelerated approval, continued approval for this indication may be contingent upon verification and description
of clinical benefit in confirmatory trials. The TRITON3 clinical trial is expected to serve as the confirmatory study for Rubraca’s
approval in mCRPC. In August 2020, the FDA approved the use of Foundation Medicine’s blood-based diagnostic test,
FoundationOne Liquid CDx, as a companion diagnostic for the detection of deleterious BRCA mutation (germline and/or
somatic) to select mCRPC patients for treatment with Rubraca.
The TRITON3 study (NCT02975934) is a Phase 3 comparative study in men with mCRPC enrolling BRCA mutant and ATM
(both inclusive of germline and/or somatic) patients who have progressed on AR-targeted therapy and who have not yet received
chemotherapy in the castrate-resistant setting. TRITON3 will compare Rubraca to physician’s choice of AR-targeted therapy or
chemotherapy in these patients. The planned primary endpoint of the study is radiologic PFS. TRITON3 initiated during the first
quarter of 2017.
The Alliance for Clinical Trials in Oncology is sponsoring the Phase 3 CASPAR study (NCT04455750) comparing the
combination of enzalutamide and Rubraca to enzalutamide alone in mCRPC. The study is expected to enroll approximately 1,000
patients in the United States at National Clinical Trials Network (“NCTN”) sites nationally and is currently the only study
evaluating the combination of a PARP inhibitor and a novel anti-androgen with an overall survival endpoint. The Alliance is part
of the NCTN sponsored by the National Cancer Institute. CASPAR is expected to begin enrolling patients in the near-term.
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LODESTAR tumor-agnostic study
The LODESTAR clinical study (NCT04171700) is a Phase 2 study evaluating Rubraca as monotherapy treatment in patients
with recurrent solid tumors associated with a deleterious homologous recombination repair (“HRR”) gene mutation across a
variety of tumor types. These gene mutations include BRCA1, BRCA2, PALB2, RAD51C, RAD51D in the primary cohort, as
well as several additional genes in an exploratory cohort. We anticipate that this study may potentially be registration-enabling
for a targeted gene- and tumor-agnostic label. The study initiated in late 2019 and is currently enrolling.
Opdivo combination trials
Our ongoing collaboration with Bristol Myers Squibb involves the evaluation of the combination of Rubraca with Bristol
Myers Squibb’s immunotherapy Opdivo® (nivolumab) in multiple tumor types.
We believe that a preclinical rationale supports the conduct of clinical trials of the combination of our PARP inhibitor
Rubraca with immune checkpoint inhibitors such as the PD-1 inhibitor Opdivo. BRCA1 and BRCA2 and other HRD mutations are
associated with increased tumor mutational burden, which may create additional tumor-specific antigens or “neoepitopes.”
Increased tumor mutation burden has been shown to correlate with increased benefit from immune checkpoint blockade. In
addition, cell death that is induced by a PARP inhibitor is considered immunogenic and stimulates a “STING-like” pathway due
to fragmented DNA release into cytosol. In mice studies, rucaparib and an anti-PD-1 antibody demonstrated anti-tumor activity in
BRCA1 mutant ovarian tumors. The combination of rucaparib and either an anti-PD-L1 or anti-CTLA-4 antibody were equally
compelling in preclinical studies.
Three combination trials of Rubraca and Opdivo are currently underway sponsored by Clovis or Bristol Myers Squibb, and in
February 2019, lucitanib was added to the clinical collaboration in combinations with Opdivo.
ATHENA is the Clovis-sponsored four-arm first-line maintenance treatment study (NCT03522246) to evaluate Rubraca and
Opdivo, Rubraca, Opdivo and placebo in approximately 1,000 newly diagnosed patients with stage III/IV high-grade ovarian,
fallopian tube, or primary peritoneal cancer who have completed platinum-based chemotherapy. The primary objectives are first,
to determine if Rubraca extends PFS versus placebo, and second, to determine if the combination of Rubraca and Opdivo
meaningfully extends PFS versus Rubraca monotherapy, or versus placebo. The ATHENA study, which initiated in 2018 and
completed enrollment in the second quarter of 2020, evaluates Rubraca in terms of two key outcomes in a step-down manner:
monotherapy versus placebo in the first-line maintenance setting in the HRD population, inclusive of BRCA, and in the all comers
(intent-to-treat) population, and later, any potential advantage for the combination of Rubraca and Opdivo in the same patient
populations. ATHENA is the first front-line switch maintenance study to evaluate a PARP inhibitor as monotherapy and in
combination with an anti-PD-1 in one study design. We anticipate the results of the Rubraca monotherapy arm versus placebo in
all study populations in the second half of 2021, and then a year or more later, the results of Rubraca plus Opdivo versus Rubraca
in all study populations. However, the timing of the ATHENA readouts is dependent on the timing of data maturity driven by
PFS events. Each of the analyses will first evaluate outcomes in the HRD population, inclusive of BRCA, and then step down to
the entire intent-to-treat population.
Bristol Myers Squibb is sponsoring CheckMate 9KD (NCT03338790), a Phase 2 three-arm study in mCRPC, evaluating
Opdivo + Rubraca, Opdivo + docetaxel + prednisone, and Opdivo + enzalutamide, with the objective of determining how the
combinations affects objective response rate and PSA response. The study has completed enrollment of patients with biomarker
negative or positive disease, for whom tumor tissue samples were used to determine biomarker status. Bristol Myers Squibb
initiated the study in the fourth quarter of 2017.
Bristol Myers Squibb is also sponsoring FRACTION-GC (NCT02935634), a Phase 2 multi-arm study evaluating Opdivo in
combination with other therapies in advanced gastric cancer. The trial includes, among other combinations, an evaluation of
Opdivo + Rubraca, Yervoy + Rubraca and the triplet combination of Opdivo + Yervoy + Rubraca. This is the first sponsored
study to explore this triplet combination, and it is now enrolling patients into the safety lead-in part of the Rubraca-containing
portion of the study.
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Pancreatic cancer
Interim results from an investigator-initiated Phase 2 trial of Rubraca as first-line maintenance therapy in platinum-sensitive
patients with advanced pancreatic cancer reported at the American Association for Cancer Research (“AACR”) annual meeting
in April 2019 suggest that first-line maintenance therapy with Rubraca following induction with platinum-based chemotherapy
provides disease control with no new safety signals among patients with a pathogenic mutation in BRCA1, BRCA2 or PALB2.
Based on these data as well as the earlier Clovis-sponsored RUCAPANC study, we plan to enroll patients with pancreatic cancer
and selected genetic mutations in the LODESTAR pan-tumor study of rucaparib that initiated in late 2019.
Bladder cancer
In April 2019, we discontinued our Clovis-sponsored ATLAS Phase 2 open-label monotherapy clinical trial evaluating
rucaparib in recurrent, metastatic bladder cancer. The decision was based on recommendations by an independent data
monitoring committee (“DMC”) following its review of preliminary efficacy data for 62 patients enrolled and treated in the
study, which demonstrated that the objective response rate in the intent-to-treat population did not meet the protocol-defined
continuance criteria, and suggested that monotherapy treatment may not provide a meaningful clinical benefit in the all-comer
patient population enrolled in the trial. Following the DMC’s recommendation to stop enrollment in the study, we terminated the
ATLAS study early. We plan to enroll patients with advanced bladder cancer and selected genetic mutations in the LODESTAR
pan-tumor study of rucaparib that initiated in late 2019.
Companion Diagnostics
Three FDA-approved companion diagnostic tests are commercially available to select cancer patients for treatment with
Rubraca.
Foundation Medicine, Inc. (“Foundation”) markets its comprehensive companion diagnostic test for solid tumors,
FoundationOne®CDx (“F1CDx”), a next generation sequencing-based in vitro diagnostic device for detection of substitutions,
insertion and deletion alterations, and copy number alterations in 324 genes (including BRCA1/2), select gene rearrangements, as
well as genomic signatures, including LOH, microsatellite instability and tumor mutational burden using tumor tissue specimens.
F1CDx is approved as a companion diagnostic to select ovarian cancer patients with BRCA1/2 mutations for treatment with
Rubraca.
In August 2020, Foundation received approval for FoundationOne Liquid CDx, a qualitative next generation sequencing-
based in vitro diagnostic test that analyzes mutations in 311 genes (including BRCA1/2) utilizing circulating cell-free DNA
isolated from plasma derived from peripheral whole blood. FoundationOne Liquid CDx is approved as a companion diagnostic to
select mCRPC and ovarian cancer patients with BRCA1/2 mutations for treatment with Rubraca.
BRACAnalysis CDx®, is a blood-based assay for the qualitative detection and classification of germline mutations in
BRCA1/2 genes commercialized by Myriad Genetics Laboratories, Inc. BRACAnalysis CDx is approved as a companion
diagnostic to select ovarian cancer patients with BRCA1/2 mutations for treatment with Rubraca.
FAP-2286 and Radionuclide Therapy Development Program
FAP-2286 is a preclinical candidate discovered by 3BP under investigation as a peptide-targeted radionuclide therapy
(“PTRT”) and imaging agent targeting fibroblast activation protein alpha (“FAP”). In September 2019, we acquired U.S. and
global rights to FAP-2286, excluding Europe (inclusive of Russia, Turkey and Israel), where 3BP retains rights. We are also
collaborating with 3BP on a discovery program directed to up to three additional, undisclosed targets for targeted radionuclide
therapy, to which we would obtain global rights for any resulting product candidates.
Patent applications are pending that claim FAP-2286 generically and specifically (including with respect to composition of
matter) that, if issued, would have expiration dates in 2040.
The Role of Fibroblast Activation Protein Alpha as a Radiopharmaceutical Target
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FAP is highly expressed in cancer-associated fibroblasts (“CAFs”) which are found in the majority of cancer types, potentially
making it a suitable target across a wide array of solid tumors. FAP is highly expressed in many epithelial cancers, including
more than 90% of breast, lung, colorectal and pancreatic carcinomas. CAFs are highly prevalent in the tumor microenvironment
of many cancers and persist through all malignant stages of a tumor, from primary tumor to metastasis. FAP has limited
expression on normal fibroblasts, reducing the potential for effects in normal tissue.
PTRT is an emerging class of drugs and it involves the administration via intravenous injection of a small amount of
radioactive material – a radionuclide – that is combined with a peptide for use as a targeted pharmaceutical. The peptide is able to
recognize and bind to specific targets on the cancer cells or in their microenvironment, and the intended result is to deliver a high
dose of radiation to the tumor while sparing normal tissue because of its rapid systemic clearance. Radionuclides with different
emission properties, primarily beta particles or more potent alpha particles, are used to deliver cytotoxic radiation to the tumor-
associated targets. In order for the targeted radiopharmaceutical to be safe and efficacious, it must rapidly attach to cancer cells or
in close vicinity to the cancer cells, be retained in or at the tumor site for a sufficient period of time that the radionuclide can have
activity on the cancer cells, have minimal attachment to non-cancer cells, and then be rapidly cleared from the body. In most
cases, the radionuclides may be visualized by using nuclear medicine imaging techniques to evaluate the specificity of the agent,
supporting a precision medicine approach to delivery of the therapeutic form of the agent.
Clinical studies of small molecule imaging agents targeting FAP have validated this target in a diverse number of cancer
indications and support the further evaluation of peptide-targeted radionuclide therapy. FAP-targeted radiopharmaceuticals have
at least two potential modes of anti-tumor activity: radiation crossfire, in which tumor cells are irradiated due to their close
proximity to CAFs; and depletion of CAFs, disrupting the communication between the tumor cells and the tumor stroma. In
addition, in certain tumor types, such as sarcoma and mesothelioma, FAP is expressed on the tumor cells themselves, and in those
tumors, FAP-targeted radiopharmaceuticals may have a direct antitumor effect.
In addition, an evident biological rationale supports the combination of targeted radionuclide therapy with cancer therapies
including PARP inhibitors and anti-PD(L)-1 agents. While our initial development focus will be on monotherapy with FAP-2286,
we intend to explore these types of combinations pre-clinically and clinically as well.
The FAP-2286 product candidate consists of a peptide that selectively binds to FAP and a linker and site to which radioactive
medical isotopes can be attached for use as an imaging agent or therapeutic agent. Our initial development plans include the use
of gallium-68 (68Ga) as an imaging agent and lutetium-177 (177Lu) as a therapeutic agent.
The anti-tumor efficacy of 177Lu-FAP-2286 has been evaluated preclinically in FAP-expressing tumor models. Data presented
at the 2020 ESMO Virtual Congress demonstrated that a single, IV dose of 177Lu-FAP-2286 resulted in statistically significant
tumor growth inhibition in two different mouse xenograft models: (1) HEK293 cells stably transfected with human FAP (HEK-
FAP); and (2) Sarc4809 sarcoma patient-derived xenograft model with endogenous FAP expression.
First Clinical Experience Reported from FAP-2286 Named Patient Use
Physicians in Germany and certain other countries may treat patients suffering from life-threatening diseases or disease
leading to severe disability with experimental drugs if no other appropriate options are available under named-patient or similar
programs. A physician may initiate treatment for specific patients until there is commercial product available and patients are
encouraged to enroll in clinical trials where possible. Named patient programs are not clinical trials and the treating physician is
solely responsible for, and makes all decisions independently, including dose and assessment of efficacy and safety, and the drug
sponsor has no role in decisions.
In December 2019, Professor Dr. Richard P. Baum reported his initial independent clinical experience with FAP-2286 in
named-patient use in eleven patients at the International Centers for Precision Oncology Foundation Symposium in Bad Berka,
Germany. At Prof. Dr. Baum’s clinic, FAP-2286 was linked to gallium-68 as a tumor-imaging compound using PET/CT scanning
and to lutetium-177 as a therapeutic agent. While we were not provided the data behind his results and have not verified those
results, we were encouraged by his presentation, and believe that his reported experience supports our pre-clinical and
development plans.
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As the early named patient use in Germany suggests, significant interest already exists within the academic community to
explore the potential of FAP as an imaging and treatment target.
Our FAP-2286 Clinical Development Plan
In December 2020, we submitted two INDs for FAP-2286 for use as imaging and treatment agents, respectively, to support an
initial Phase 1 study, designated the LuMIERE study, to determine the dose and tolerability of 177Lu-FAP-2286 as a therapeutic
agent. Expansion cohorts are planned in multiple tumor types as part of a global development program. The INDs are expected to
become effective following receipt and submission of satisfactory CMC data for the gallium-68 labeled imaging agent from
clinical sites. The FAP-targeting imaging agent will be utilized to identify tumors that contain FAP for treatment in the Phase 1
clinical study, which we anticipate initiating in the first half of 2021. Studies of FAP-2286 linked to an alpha-emitter are also
under consideration.
In addition to our planned study, the University of California San Francisco is sponsoring a separate, investigator-initiated
imaging-only study with gallium-68 labelled FAP-2286 to evaluate FAP expression in multiple tumor types (NCT04621435); this
study is enrolling patients. Data from the study is expected to inform indication selection for the LuMIERE Phase 2 expansion
cohorts.
Lucitanib – a VEGFR, PDGFR and FGFR Inhibitor
Lucitanib is an investigational, oral, potent angiogenesis inhibitor which inhibits vascular endothelial growth factor receptors
1 through 3 (“VEGFR1-3”), platelet-derived growth factor receptors alpha and beta (“PDGFR α/β”) and fibroblast growth factor
receptors 1 through 3 (“FGFR1-3”).
The composition of matter patent for lucitanib expires in 2030 in the U.S. and 2028 in Europe, with up to five years patent
term extension available. We hold the global (excluding China) development and commercialization rights for lucitanib.
VEGF, PDGF and FGF: The Role of these Tyrosine Kinase Inhibitors in Cancer
The VEGFs are a family of related extracellular proteins that normally regulate blood and lymphatic vessel development in
humans. They act by binding to and activating VEGF receptors, which are cell surface proteins that transmit growth signals to
specific cells that are involved in the development of new blood vessels. Certain VEGFs promote growth of multiple solid tumors
by stimulating the formation of new blood vessels to feed the tumor and allow it to grow and metastasize. Tumors produce an
excessive amount of VEGF. This results in excess VEGFR signaling and the formation of new blood vessels within the tumor.
The VEGF ligands that induce angiogenesis are often present in a wide range of cancer indications, including a type of kidney
cancer called renal cell carcinoma, a type of liver cancer called hepatocellular carcinoma, gastric cancer, head and neck cancers
and other solid tumors.
The PDGF family consists of five different isoforms of PDGF ligand that bind to and activate cellular responses through two
different receptors (PDGFRα/ß). In tumors, PDGF signaling plays a diverse role in many aspects of tumor development
promoting cell proliferation, invasion, migration and angiogenesis. Amplification and/or mutation of the gene encoding the
PDGFRα receptor is observed in a wide range of cancers, including lung cancer, an aggressive form of brain cancer called
glioblastoma and a cancer of the gastrointestinal tract known as gastrointestinal stromal tumors. Amplification of the PDGFRα
gene results in excess production, or the over-expression, of PDGFRα protein on the surface of the tumor cell. The over-
expression of PDGFRα on the tumor cell surface leads to an increased receptor signaling, which stimulates uncontrolled
proliferation of some types of tumor cells.
The FGFs are a family of related extracellular proteins that normally regulate cell proliferation and survival in humans. The
FGF family consists of 22 ligands that exert their physiological effect on cells by binding to four FGFRs (FGFR1- 4). As with the
PDGF family, some cancers display FGF/FGFR gene amplification/mutation resulting in continual activation of the FGFR
signaling pathway leading to uncontrolled cell division. Tumors with a relatively high incidence of FGF aberrations, which
include amplification of the FGFR1 gene and amplification of a region of chromosome 11q that contains several FGF ligands,
include breast and lung cancers. In addition, FGFR gene amplification/mutation is also observed in a wide range of cancer
indications including sarcoma, ovarian cancer, adenocarcinoma of the lung, bladder cancer, colorectal cancer and endometrial
cancer.
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As an inhibitor of VEGFR1-3, PDGFRα/ß and FGFR1-3 and given the role that each of these receptor kinases plays in tumor
progression and metastasis formation, lucitanib has the potential benefit of targeting three relevant pro-angiogenic growth factors
in targeted patient populations identified by molecular markers. Data from earlier studies suggest that lucitanib’s VEGF
inhibition may be the primary driver of its activity, and both preclinical and clinical data provide a scientific rationale for further
development on lucitanib in combination with other agents.
Targeting angiogenesis and immune checkpoint pathways may have a synergistic effect on antitumor activity. Angiogenesis
has been shown to be immunosuppressive within the tumor microenvironment, dampening anti-tumor immune responses,
according to Nature Reviews in Clinical Oncology (Fukumura 2018). Immune effects of angiogenesis include modulation of T-
cell infiltration into the tumor, inhibition of dendritic cell maturation, and the modulation of cell adhesion molecules and immune
cell populations. Inhibition of angiogenesis by small molecule RTK inhibitors or monoclonal antibodies may reverse
immunosuppression. These data suggest the clinical activity of PD-(L)1 inhibitors may be enhanced through the inhibition of
angiogenesis by lucitanib. Clovis preclinical studies of multiple syngeneic tumor models have shown that lucitanib in
combination with a PD-1 inhibitor delivers superior activity. Multiple Phase 1-3 studies are examining the combination of
angiogenesis and PD-(L)1 inhibitors in different indications.
Lucitanib inhibits the same three pathways as Lenvima (lenvatinib), which has shown encouraging results when combined
with the PD-1 inhibitor Keytruda (pembrolizumab), and this combination has been approved by the FDA on an accelerated basis
for the treatment of certain forms of endometrial cancer. This, together with preclinical data for lucitanib in combination with a
PD(L)-1 inhibitor as described above, represent a scientific rationale for development of lucitanib in combination with a PD(L)-1
inhibitor, and in February 2019, lucitanib was added to our clinical collaboration with Bristol Myers Squibb evaluating
combinations with Opdivo.
LIO-1 is an open-label, Phase 1b/2 study (NCT04042116) of lucitanib in combination with Opdivo in advanced gynecologic
cancers and other solid tumors to determine the recommended dose of lucitanib in combination with Opdivo in patients with an
advanced solid tumor (Phase 1b); followed by evaluation of the safety and efficacy of lucitanib and Opdivo in patients with an
advanced gynecological solid tumor (Phase 2), including ovarian, endometrial and cervical cancers. The primary efficacy
endpoint of the LIO-1 study is ORR as assessed by the investigator according to RECIST v1.1.
Initial data presented at the 2020 ESMO Virtual Congress from the Phase 1b part of the study in patients with an advanced
solid tumor (n=17) identified the recommended starting Phase 2 dose of oral lucitanib to be used in combination with Opdivo and
showed promising signs of antitumor activity. The recommended oral starting dose of lucitanib was established as 6 mg once
daily, to be given in combination with Opdivo at a fixed dose of 480 mg intravenously (IV) once every 28 days. Across three
dose levels studied (6 mg, 8 mg and 10 mg) of lucitanib in combination with Opdivo at (480 mg once every 28 days), only one
dose-limiting toxicity of Grade 3 proteinuria was observed among 17 patients, and there were no apparent differences in TEAE
frequencies between dose levels. In this small patient population, TEAEs were consistent with those expected for lucitanib and
Opdivo. The Phase 2 part of the study is currently enrolling. We expect to present interim data from LIO-1 at medical meetings
in 2021, which are expected to include interim results from the ovarian and endometrial cancer expansion cohorts.
Preclinical and clinical data also support the potential activity of combining angiogenesis and PARP inhibition. According to
Cancer Research and Molecular and Cellular Biology, there is a link between PARP inhibition and suppression of angiogenesis:
chronic hypoxia induces down-regulation of BRCA1 and RAD51 and decreases homologous recombination in cancer cells.
Clovis preclinical data in an ovarian tumor BRCA1mut syngeneic model showed the combination of lucitanib and rucaparib is
more active than monotherapy than either lucitanib or rucaparib as a single agent and showed similar anti-tumor activity to
rucaparib in combination with another oral VEGFR inhibitor. Published clinical data for the combination of another oral VEGFR
inhibitor and PARP inhibitor in development further demonstrate the potential activity of the combination.
Competition
The development and commercialization of new drugs is intensely competitive, and we face competition from major
pharmaceutical companies, biotechnology companies, universities and other research institutions worldwide. Our competitors
may develop or market products or other novel technologies that are more effective, safer or less costly than
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any that have been or will be commercialized by us, or may obtain regulatory approval for their products more rapidly than we
may obtain approval for ours.
The acquisition or licensing of pharmaceutical products is also very competitive. More established companies, which have
acknowledged strategies to license or acquire products, may have competitive advantages over us, as may other emerging
companies that take similar or different approaches to product acquisitions. Many of our competitors have substantially greater
financial, technical and human resources than we have. Our competitors also compete with us in recruiting and retaining qualified
scientific, management and commercial personnel as well as in establishing clinical trial sites and patient enrollment for clinical
trials.
Additional mergers and acquisitions in the pharmaceutical industry may result in even more resources being concentrated in
our competitors. Competition may increase further because of advances made in the commercial applicability of technologies and
greater availability of capital for investment in these fields. Our success will be based in part on our ability to build and actively
manage a portfolio of drugs that addresses unmet medical needs and creates value in patient therapy.
Rubraca Competition
Lynparza®/olaparib (AstraZeneca UK Limited) was the first PARP inhibitor to market and has been approved in the US in the
following indications:
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for the maintenance treatment of adult patients with deleterious or suspected deleterious germline or somatic BRCA-
mutated (“gBRCAm” or “sBRCAm”) advanced epithelial ovarian, fallopian tube, or primary peritoneal cancer who are
in complete or partial response to first-line platinum-based chemotherapy;
in combination with bevacizumab for the maintenance treatment of adult patients with advanced epithelial ovarian,
fallopian tube or primary peritoneal cancer who are in a complete or partial response to first-line platinum-based
chemotherapy and whose cancer is associated with HRD-positive status defined by either:
o
o
a deleterious or suspected deleterious BRCA mutation, and/or
genomic instability;
for the treatment of adult patients who have deleterious or suspected deleterious gBRCAm advanced ovarian cancer who
have been treated with three or more prior lines of chemotherapy;
for the maintenance treatment of adult patients with recurrent epithelial, fallopian tube or primary peritoneal cancer,
who are in a complete or partial response to platinum-based chemotherapy;
for the treatment of adult patients with deleterious or suspected deleterious gBRCAm, human epidermal growth factor
receptor 2 (“HER2”)-negative metastatic breast cancer who have been treated with chemotherapy in the neoadjuvant,
adjuvant, or metastatic setting;
for the maintenance treatment of adult patients with deleterious or suspected deleterious gBRCAm metastatic pancreatic
adenocarcinoma whose disease has not progressed on at least 16 weeks of a first-line platinum-based chemotherapy
regimen; and
for the treatment of adult patients with deleterious or suspected deleterious germline or somatic homologous
recombination repair (“HRR”) gene-mutated mCRPC who have progressed following prior treatment with enzalutamide
or abiraterone.
Lynparza is approved in Europe as monotherapy for the:
● maintenance treatment of adult patients with advanced (FIGO stages III and IV) BRCA1/2-mutated (germline and/or
somatic) high-grade epithelial ovarian, fallopian tube or primary peritoneal cancer who are in response (complete or
partial) following completion of first-line platinum-based chemotherapy;
● maintenance treatment of adult patients with platinum-sensitive relapsed high-grade epithelial ovarian, fallopian tube, or
primary peritoneal cancer who are in response (complete or partial) to platinum-based chemotherapy;
●
in combination with bevacizumab for the maintenance treatment of adult patients with advanced (FIGO stages III and
IV) high-grade epithelial ovarian, fallopian tube or primary peritoneal cancer who are in response
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(complete or partial) following completion of first-line platinum-based chemotherapy in combination with bevacizumab
and whose cancer is associated with homologous recombination deficiency HRD-positive status defined by either a
BRCA1/2 mutation and/or genomic instability;
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●
treatment of adult patients with germline BRCA1/2-mutations, who have HER2 negative locally advanced or metastatic
breast cancer. Patients should have previously been treated with an anthracycline and a taxane in the (neo)adjuvant or
metastatic setting unless patients were not suitable for these treatments. Patients with hormone receptor-positive breast
cancer should also have progressed on or after prior endocrine therapy, or be considered unsuitable for endocrine
therapy;
for the maintenance treatment of adult patients with germline BRCA1/2-mutations who have metastatic adenocarcinoma
of the pancreas and have not progressed after a minimum of 16 weeks of platinum treatment within a first-line
chemotherapy regimen; and
for the treatment of adult patients with metastatic castration-resistant prostate cancer and BRCA1/2-mutations (germline
and/or somatic) who have progressed following prior therapy that included a new hormonal agent.
AstraZeneca and Merck & Co., Inc. have a global strategic oncology collaboration to co-develop and co-commercialize
Lynparza for multiple cancer types. Lynparza is being investigated, alone and in combination with other agents, in multiple
indications across several tumor types.
Zejula®/niraparib (GlaxoSmithKline plc) was the first PARP inhibitor approved for maintenance in the recurrent setting and
is approved in the United States in the following indications:
●
●
●
for the maintenance treatment of adult patients with advanced epithelial ovarian, fallopian tube, or primary peritoneal
cancer who are in a complete or partial response to first-line platinum-based chemotherapy;
for the maintenance treatment of adult patients with recurrent epithelial ovarian, fallopian tube, or primary peritoneal
cancer who are in a complete or partial response to platinum-based chemotherapy; and
for the treatment of adult patients with advanced ovarian, fallopian tube, or primary peritoneal cancer who have been
treated with three or more prior chemotherapy regimens and whose cancer is associated with HRD-positive status
defined by either:
o
o
a deleterious or suspected deleterious BRCA mutation, or
genomic instability and who have progressed more than six months after response to the last platinum-based
chemotherapy.
Zejula is approved in Europe:
●
●
as monotherapy for the maintenance treatment of adult patients with platinum-sensitive relapsed high grade serous
epithelial ovarian, fallopian tube, or primary peritoneal cancer who are in response (complete or partial) to platinum-
based chemotherapy; and
as monotherapy for the maintenance treatment of adult patients with advanced epithelial (FIGO Stages III and IV) high-
grade ovarian, fallopian tube or primary peritoneal cancer who are in response (complete or partial) following
completion of first-line platinum-based chemotherapy.
Additional clinical investigations of Zejula in ovarian, breast prostate and lung cancers are ongoing or planned. Janssen
Pharmaceuticals has licensed rights to develop and commercialize niraparib specifically for patients with prostate cancer
worldwide, except in Japan. Preliminary results announced in February and September 2019 for Janssen’s Phase 2 GALAHAD
study evaluating niraparib in patients with mCRPC and DNA-repair pathway defects showed that approximately 40% of patients
with a BRCA1/2 mutation demonstrated a RECIST response. In October 2019, niraparib was granted Breakthrough Therapy
Designation based on data from the Phase 2 GALAHAD study.
TALZENNA™/talazoparib (Pfizer Inc.) is approved in the US and EU for the treatment of adult patients with deleterious or
suspected deleterious germline BRCA-mutated (gBRCAm) HER2-negative locally advanced or metastatic breast cancer.
There are several PARP inhibitors in clinical development including AbbVie Inc.’s veliparib and ABT-767, BeiGene, Ltd.’s
pamiparib, Checkpoint Therapeutics Inc.’s CK-102, and Oncology Venture A/S’s 2X-121. While most PARP
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inhibitor development focuses on ovarian, breast and prostate cancers, additional efforts are aimed toward bladder, lung, and
pancreatic cancers as well.
In addition, combination approaches that include PARP inhibitors, including Lynparza and Zejula, with other anticancer
agents are in various phases of clinical development across a variety of oncology indications. These combination therapies may
result in future competitive pressure on Rubraca.
Outside of the PARP class, Avastin®/bevacizumab is approved in the US in ovarian cancer for the following indications:
●
●
●
epithelial ovarian, fallopian tube, or primary peritoneal cancer in combination with carboplatin and paclitaxel, followed
by Avastin as a single agent, for Stage III or IV disease following initial surgical resection;
epithelial ovarian, fallopian tube, or primary peritoneal cancer in combination with paclitaxel, pegylated liposomal
doxorubicin, or topotecan for platinum-resistant recurrent disease who received no more than 2 prior chemotherapy
regimens; and
epithelial ovarian, fallopian tube, or primary peritoneal cancer in combination with carboplatin and paclitaxel or
carboplatin and gemcitabine, followed by Avastin as a single agent, for platinum-sensitive recurrent disease.
Additionally, Avastin®/bevacizumab is approved in the EU in ovarian cancer for the following indications:
●
●
●
in combination with carboplatin and paclitaxel for the front-line treatment of adult patients with advanced (International
Federation of Gynecology and Obstetrics (FIGO) stages III B, III C and IV) epithelial ovarian, fallopian tube, or
primary peritoneal cancer;
in combination with carboplatin and gemcitabine or in combination with carboplatin and paclitaxel, for treatment of
adult patients with first recurrence of platinum-sensitive epithelial ovarian, fallopian tube or primary peritoneal cancer
who have not received prior therapy with bevacizumab or other VEGF inhibitors or VEGF receptor–targeted agents; and
in combination with paclitaxel, topotecan, or pegylated liposomal doxorubicin is indicated for the treatment of adult
patients with platinum-resistant recurrent epithelial ovarian, fallopian tube, or primary peritoneal cancer who received
no more than two prior chemotherapy regimens and who have not received prior therapy with bevacizumab or other
VEGF inhibitors or VEGF receptor–targeted agents.
Other out-of-class agents approved for use in advanced ovarian cancer include chemotherapeutic agents (e.g. platinum-based
doublets, platinum monotherapy, non-platinum chemotherapy, etc.), Doxil® (Janssen Biotech, Inc.), and Hycamtin® (Novartis
Pharmaceuticals Corporation). There are additional out-of-class agents in clinical development that may pose a future
competitive threat to Rubraca.
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Lucitanib Competition
Competitive threats to lucitanib include other inhibitors of VEGFR, PDGFR and FGFR, but most significantly Eisai Inc.’s
Lenvima/lenvatinib. Lenvima is approved for the following indications in the United States:
●
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●
for the treatment of patients with locally recurrent or metastatic, progressive, radioactive iodine-refractory differentiated
thyroid cancer;
in combination with everolimus, for the treatment of patients with advanced renal cell carcinoma following one prior
anti-angiogenic therapy;
for the first-line treatment of patients with unresectable hepatocellular carcinoma; and
in combination with Merck & Co., Inc.’s PD-1 inhibitor Keytruda (pembrolizumab), for the treatment of patients with
advanced endometrial carcinoma that is not microsatellite instability-high or mismatch repair deficient, who have
disease progression following prior systemic therapy and are not candidates for curative surgery or radiation.
In addition, Eisai and Merck have established a strategic collaboration for the worldwide co-development and co-
commercialization of Lenvima, and have a broad clinical program underway to evaluate Lenvima, alone and in combination with
Keytruda, in a wide variety of tumor types.
FAP-2286 Competition
Competitive threats to our product candidate FAP-2286 include those that are currently approved and widely available or are
established as standards of care for treatment indications that may be relevant for FAP-2286.
More generally, there is an increasing commitment of resources in the pharmaceutical industry to emerging areas such as
antibody drug conjugate therapies and radio-labeled therapeutics and screening agents, which may in the future compete in the
indications for which we choose to develop FAP-2286. For example, in June 2019, Sofie Biosciences licensed rights including
small molecule inhibitors of FAP for imaging use from University Medical Centre Heidelberg. More recently, Point Biopharma
has entered into an exclusive licensing agreement with Avacta to use their technology in the development of a range of FAP-
activated radiopharmaceuticals.
In addition, other potential FAP-directed radionuclide therapeutics, small molecules, biologics, immunotherapies, and other
treatment modalities that target FAP are at various stages of development. For example, AMG506 (also known as MP0310) is a
multi-specific FAP x 4-1BB-targeting DARPin® biologic that is being developed by Amgen in collaboration with Molecular
Partners, AG. AMG506 is being investigated in at least one clinical trial (NCT04049903 ) in patients with advanced solid tumors.
Roche also has several compounds that are being investigated. RO6874281 is a targeted immunocytokine that combines an
engineered interleukin-2 variant (IL2v) with an antibody against FAP. RO6874813 (RG7386), a bispecific antibody that binds to
FAP and death receptor 5 (DR5), is being studied in patients with advanced or metastatic solid tumors (NCT02558140).
PSIOxus Therapeutics is developing an oncolytic adenoviral vector (NG-641) designed to deliver genes to tumor cells that
produce proteins targeting tumor-associated stromal fibroblasts. The NG-641 virus encodes genes for FAP-targeting bispecific T-
cell activator (FAP-TAc), the chemokines CXCL9 and CXCL10, and interferon alpha. NG-641 is being investigated in patients
with advanced solid tumors (NCT04053283).
Bioxcel Therapeutics is developing talabostat (BXCL701), a molecule that is designed to inhibit dipeptidyl peptidase (DPP)
8/9 and block immune evasion by targeting FAP. BXCL is being investigated in combination with pembrolizumab in patients
with aggressive prostate cancer (NCT03910660) and pancreatic cancer (NCT04123574).
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In addition, radionuclide therapeutics with targets other than FAP may compete with FAP-2286 if they target the same tumor
type. For example, in September 2017, Endocyte, Inc. licensed rights to develop and commercialize agents targeting prostate-
specific membrane antigen, including the drug candidate 177Lu-PSMA-617, a radioligand therapeutic, from ABX GmbH.
Endocyte was acquired by Novartis in 2018, and 177Lu-PSMA-617 is currently in a phase 3 trial (NCT03511664) for the
treatment of metastatic castration-resistant prostate cancer. In addition, other targeted radionuclide therapeutics are in earlier
stage clinical development, including but not limited to 3BP-227 (Ipsen) which targets neurotensin receptor type 1, BAY2287411
(Bayer) which targets mesothelin, BAY2701439 (Bayer) which targets HER-2, and BAY 2315497 (Bayer) which targets PSMA.
Furthermore, universities and private and public research institutes are active in cancer research, the results of which may
result in direct competition with FAP-2286. For example, the German Center of Cancer Research and University Medical Center
Heidelberg, the owners of the patent rights to PSMA 617 (which were licensed to ABX and, in turn, to Novartis), are continuing
to engage in research relating to radioligand therapeutics.
License Agreements
Pfizer Inc.
In June 2011, we entered into a license agreement with Pfizer, Inc. (“Pfizer”) to obtain the exclusive global rights to develop
and commercialize Rubraca. The exclusive rights are exclusive even as to Pfizer and include the right to grant sublicenses.
Pursuant to the terms of the license agreement, we made a $7.0 million upfront payment to Pfizer and are required to make
additional payments to Pfizer for the achievement of certain development and regulatory and sales milestones and royalties on
sales as required by the license agreement. Prior to the FDA approval of Rubraca, we made milestone payments of $1.4 million,
which were recognized as acquired in-process research and development expense.
On August 30, 2016, we entered into a first amendment to the worldwide license agreement with Pfizer, which amends the
June 2011 existing worldwide license agreement to permit us to defer payment of the milestone payments payable upon (i) FDA
approval of an NDA for 1st Indication in US and (ii) EMA approval of an MAA for 1st Indication in the EU, to a date that is 18
months after the date of achievement of such milestones.
On December 19, 2016, Rubraca received its initial FDA approval. This approval resulted in a $0.75 million milestone
payment to Pfizer as required by the license agreement, which was paid in the first quarter of 2017. This FDA approval also
resulted in an obligation to pay a $20.0 million milestone payment, for which we exercised the option to defer payment by
agreeing to pay $23.0 million within 18 months after the date of the FDA approval. We paid the $23.0 million milestone payment
in June 2018.
In April 2018, Rubraca received a second FDA approval. This approval resulted in an obligation to pay a $15.0 million
milestone payment, which we paid in April 2018.
In May 2018, Rubraca received its initial European Commission marketing authorization. This approval resulted in an
obligation to pay a $20.0 million milestone payment, which we paid in June 2018.
In January 2019, Rubraca received a second European Commission approval. This approval resulted in an obligation to pay a
$15.0 million milestone payment, which we paid in February 2019.
In June 2019, we paid a $0.75 million milestone payment due to the launch of Rubraca as maintenance therapy in Germany in
March 2019.
In May 2020, Rubraca received a third FDA approval for Rubraca as a monotherapy treatment of adult patients with
BRCA1/2-mutant recurrent, metastatic castrate-resistant prostate cancer. This approval resulted in an obligation to pay an $8.0
million milestone payment, which we paid in June 2020.
These milestone payments were recognized as intangible assets and are amortized over the estimated remaining useful life of
Rubraca.
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We are obligated under the license agreement to use commercially reasonable efforts to develop and commercialize Rubraca
and we are responsible for all ongoing development and commercialization costs for Rubraca. We are required to make
regulatory milestone payments to Pfizer of up to an additional $8.0 million in aggregate if specified clinical study objectives and
regulatory filings, acceptances and approvals are achieved. In addition, we are obligated to make sales milestone payments to
Pfizer if specified annual sales targets for Rubraca are met, which relate to annual sales targets of $250.0 million and above,
which, in the aggregate, could amount to total milestone payments of $170.0 million, and tiered royalty payments at a mid-teen
percentage rate on net sales, with standard provisions for royalty offsets to the extent we need to obtain any rights from third
parties to commercialize Rubraca.
The license agreement with Pfizer will remain in effect until the expiration of all of our royalty and sublicense revenue
obligations to Pfizer, determined on a product-by-product and country-by-country basis, unless we elect to terminate the license
agreement earlier. If we fail to meet our obligations under the agreement and are unable to cure such failure within specified time
periods, Pfizer can terminate the agreement, resulting in a loss of our rights to Rubraca and an obligation to assign or license to
Pfizer any intellectual property rights or other rights we may have in Rubraca, including our regulatory filings, regulatory
approvals, patents and trademarks for Rubraca.
AstraZeneca UK Limited
In April 2012, we entered into a license agreement with AstraZeneca UK Limited (“AstraZeneca”) to acquire exclusive rights
associated with Rubraca under a family of patents and patent applications that claim methods of treating patients with PARP
inhibitors in certain indications. The license enables the development and commercialization of Rubraca for the uses claimed by
these patents. AstraZeneca also receives royalties on net sales of Rubraca.
Advenchen Laboratories LLC
On November 19, 2013, we acquired all of the issued and outstanding capital stock of EOS pursuant to the terms set forth in
that certain Stock Purchase Agreement, dated as of November 19, 2013 (the “Stock Purchase Agreement”), by and among the
Company, EOS, its shareholders (the “Sellers”) and Sofinnova Capital V FCPR, acting in its capacity as the Sellers’
representative. Following the acquisition, EOS became a wholly-owned subsidiary of the Company. Under the terms of the Stock
Purchase Agreement, in addition to the initial purchase price paid at the time of the closing of the acquisition and other license
fees due to Advenchen described below, we will also be obligated to pay to the Sellers a milestone payment of $65.0 million
upon obtaining the first NDA approval from the FDA with respect to lucitanib.
In October 2008, Ethical Oncology Science, S.p.A. (“EOS”) (now known as Clovis Oncology Italy S.r.l.) entered into an
exclusive license agreement with Advenchen Laboratories LLC (“Advenchen”) to develop and commercialize lucitanib on a
global basis, excluding China.
We are obligated to pay Advenchen tiered royalties at percentage rates in the mid-single digits on net sales of lucitanib, based
on the volume of annual net sales achieved. In addition, after giving effect to the first and second amendments to the license
agreement, we are required to pay to Advenchen 25% of any consideration, excluding royalties, we receive from sublicensees, in
lieu of the milestone obligations set forth in the agreement. We are obligated under the agreement to use commercially reasonable
efforts to develop and commercialize at least one product containing lucitanib, and we are also responsible for all remaining
development and commercialization costs for lucitanib.
The license agreement with Advenchen will remain in effect until the expiration of all our royalty obligations to Advenchen,
determined on a product-by-product and country-by-country basis, unless we elect to terminate the agreement earlier. If we fail to
meet our obligations under the agreement and are unable to cure such failure within specified time periods, Advenchen can
terminate the agreement, resulting in a loss of our rights to lucitanib.
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3B Pharmaceuticals GmbH (“3BP”)
In September 2019, we entered into a global license and collaboration agreement with 3BP to develop and commercialize a
PTRT and imaging agent targeting FAP. The lead candidate, designated internally as FAP-2286, is being developed pursuant to a
global development plan agreed to by the parties. We are responsible for the costs of all preclinical and clinical development
activities described in the plan, including the costs for a limited number of 3BP full-time equivalents and external costs incurred
during the preclinical development phase of the collaboration. Upon the signing of the license and collaboration agreement in
September 2019, we made a $9.4 million upfront payment to 3BP, which we recognized as acquired in-process research and
development expense.
Pursuant to the terms of the FAP agreement, we are required to make additional payments to 3BP for annual technology
access fees and upon the achievement of certain development and regulatory milestone events (or on certain dates, whichever
occur earlier). We are also obligated to pay 3BP single- to low-double-digit royalties on net sales of the FAP-targeted therapeutic
product and imaging agent, based on the volume of annual net sales achieved. In addition, 3BP is entitled to receive 34% of any
consideration, excluding royalties on the therapeutic product, pursuant to any sublicenses we may grant.
We are obligated under the license and collaboration agreement to use diligent efforts to develop FAP-2286 and
commercialize a FAP-targeted therapeutic product and imaging agent, and we are responsible for all commercialization costs in
our territory. The agreement with 3BP will remain in effect until the expiration of our royalty obligations to 3BP, determined on a
product-by-product and country-by-country basis, unless we elect to terminate the agreement earlier. If we fail to meet our
obligations under the agreement and are unable to cure such failure within specified time periods, 3BP can terminate the
agreement, resulting in a loss of our rights. 3BP also has the right to terminate the agreement under certain circumstances in
connection with our change of control in which the acquiring party retains a product competitive with the FAP-targeted
therapeutic product or, in the event marketing authorization has not yet been obtained, does not agree to the then-current global
development plan.
In February 2020, we finalized the terms of a drug discovery collaboration agreement with 3BP to identify up to three
additional, undisclosed targets for peptide-targeted radionuclide therapy, to which we will obtain global rights for any resulting
product candidates. We are responsible for the costs of all preclinical and clinical development activities conducted under the
discovery program, including the costs for a limited number of 3BP full-time equivalents and external costs incurred during the
discovery and preclinical development phase for each collaboration target. The discovery collaboration agreement was effective
December 31, 2019, for which we incurred a $2.1 million technology access fee, which we accrued and recognized as a research
and development expense.
Pursuant to the terms of the discovery collaboration agreement, we are required to make additional payments to 3BP for
annual technology access fees and upon the achievement of certain development and regulatory milestone events (or on certain
dates, whichever occur earlier). We are also obligated to pay 3BP a 6% royalty on net sales of License Products (as defined in the
agreement), based on the volume of quarterly net sales achieved.
We are obligated under the discovery collaboration agreement to use diligent efforts to develop and commercialize the product
candidates, if any, that result from the discovery program, and we are responsible for all clinical development and
commercialization costs. The agreement with 3BP will remain in effect until the expiration of our royalty obligations to 3BP,
determined on a product-by-product and country-by-country basis, unless we elect to terminate the agreement earlier. If we fail to
meet our obligations under the agreement and are unable to cure such failure within specified time periods, 3BP can terminate the
agreement, resulting in a loss of our rights.
Government Regulation
Government authorities in the United States (including federal, state and local authorities) and in other countries, extensively
regulate, among other things, the manufacturing, research and clinical development, marketing, labeling and packaging, storage,
distribution, post-approval monitoring and reporting, advertising and promotion, pricing and export and import of pharmaceutical
products such as Rubraca and our other product candidates. Our product candidates must be approved by the FDA through the
NDA process before they may be legally placed on the market in the United States. In the European Union, a product requires
approval from the European Commission (“EC”) following a favorable assessment from the European Medicines Agency
(“EMA”) through the marketing authorization application (“MAA”) process for a product falling within the scope of the
centralized procedure or a national MAA process (albeit through
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mutual recognition or decentralized procedure). Our product candidates will be subject to similar requirements in other countries
prior to marketing in those countries. The process of obtaining regulatory approvals and the subsequent compliance with
appropriate federal, state, local and foreign statutes and regulations require the expenditure of substantial time and financial
resources. Moreover, failure to comply with applicable regulatory requirements may result in, among other things, warning
letters, clinical holds, civil or criminal penalties, recall or seizure of products, injunction, disbarment, partial or total suspension
of production or withdrawal of the product from the market.
U.S. Government Regulation
In the United States, the FDA regulates drugs under the Federal Food, Drug and Cosmetic Act (“FDCA”) and its
implementing regulations. Drugs are also subject to other federal, state and local statutes and regulations. The process required by
the FDA before product candidates may be marketed in the United States generally involves the following:
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●
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●
●
●
●
completion of extensive non-clinical laboratory tests (evaluations of product chemistry, toxicity and formulation) and
non-clinical animal studies, all performed in accordance with the FDA’s Good Laboratory Practice regulations;
submission to the FDA of an IND which must become effective before human clinical trials may begin and must be
updated at least annually;
performance of adequate and well-controlled human clinical trials to establish the safety and efficacy of the product
candidate for each proposed indication;
submission to the FDA of a marketing authorization application in the form of an NDA for the initial commercial sale of
a product, or of a sNDA, for approval of a new indication if the product is already approved for another indication;
satisfactory completion of an FDA pre-approval inspection of the manufacturing facilities at which the active
pharmaceutical ingredient (“API”) and finished drug product are produced and tested to assess compliance with current
Good Manufacturing Practices (“cGMP”) and/or sites involved in clinical studies to assess compliance with Good
Clinical Practices (“GCP”);
if FDA convenes an advisory committee, satisfactory completion of the advisory committee review; and
FDA review and approval of the marketing authorization application and product prescribing information prior to any
commercial marketing or sale of the drug for the intended use.
An IND is a request for authorization from the FDA to administer a product candidate to humans for further research of the
drug candidate’s safety and/or efficacy. The central focus of an IND submission is on the general investigational plan for the drug
candidate and the protocol(s) for human studies. The IND also includes results of animal studies or other human studies, as
appropriate, as well as manufacturing information, analytical data and any available clinical data or literature to support the use
of the product candidate. An IND must become effective before human clinical trials may begin. An IND will automatically
become effective 30 days after receipt by the FDA, unless before that time the FDA raises concerns or questions related to the
proposed clinical trials, including concerns that human research subjects will be exposed to unreasonable health risks. In such a
case, the IND may be placed on clinical hold requiring delay of a proposed clinical investigation, and the IND sponsor and the
FDA must resolve any outstanding concerns or questions before clinical trials can begin. Accordingly, submission of an IND may
or may not result in the FDA allowing clinical trials to commence.
Clinical trials involve the administration of the drug candidate to human subjects under the supervision of qualified
investigators and in accordance with GCP, which include the requirement that all research subjects provide their informed
consent for their participation in any clinical trial. Clinical trials are conducted under protocols detailing, among other things, the
objectives of the study, the parameters to be used in monitoring safety and the efficacy criteria to be evaluated. A protocol for
each clinical trial and any subsequent protocol amendments must be submitted to the FDA as part of the IND. Additionally,
approval must also be obtained from an Institutional Review Board (“IRB”) for each medical center proposing to conduct the
clinical trial before the trials may be initiated, and the IRB must monitor the study until completed. Clinical trials are subject to
central registration and results reporting requirements, such as on www.clinicaltrials.gov.
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The clinical investigation of a product candidate is generally divided into three phases. Although the phases are usually
conducted sequentially, they may overlap or be combined. The three phases of an investigation are as follows:
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Phase 1. Phase 1 includes the initial introduction of the product candidate into humans. Phase 1 clinical trials are
typically closely monitored and may be conducted in patients with the target disease or condition or in healthy
volunteers. These studies are designed to evaluate the safety, dosage tolerance, metabolism and pharmacologic actions
of product candidate in humans, the side effects associated with increasing doses, and if possible, to gain early evidence
on effectiveness. During Phase 1 clinical trials, sufficient information about the product candidate’s pharmacokinetics
and pharmacological effects may be obtained to permit the design of well-controlled and scientifically valid Phase 2
clinical trials. The total number of participants included in Phase 1 clinical trials varies but is generally in the range of
20 to 80.
Phase 2. Phase 2 includes controlled clinical trials conducted to preliminarily or further evaluate the effectiveness of the
product candidate for a particular indication(s) in patients with the disease or condition under study, to determine dosage
tolerance and optimal dosage, and to identify possible adverse side effects and safety risks associated with the drug.
Phase 2 clinical trials are typically well-controlled, closely monitored, and conducted in a limited patient population,
usually involving no more than several hundred participants.
Phase 3. Phase 3 clinical trials are generally controlled clinical trials conducted in an expanded patient population
generally at geographically dispersed clinical trial sites. They are performed after preliminary evidence suggesting
effectiveness of the drug has been obtained and are intended to further evaluate dosage, clinical effectiveness and safety,
to establish the overall benefit-risk relationship of the investigational drug product and to provide an adequate basis for
product approval. Phase 3 clinical trials usually involve several hundred to several thousand participants.
A pivotal study is a clinical study which adequately meets regulatory agency requirements for the evaluation of a drug
candidate’s efficacy and safety such that it can be used to justify the approval of the product. Generally, pivotal studies are also
Phase 3 studies but may be Phase 2 studies if the trial design provides a well-controlled and reliable assessment of clinical
benefit, particularly in situations where there is an unmet medical need.
Human clinical trials are inherently uncertain, and Phase 1, Phase 2 and Phase 3 testing may not be successfully completed.
The FDA, an IRB or the clinical trial sponsor may suspend or terminate a clinical trial at any time on various grounds, including a
finding that the research subjects are being exposed to an unacceptable health risk. Additionally, some clinical trials are overseen
by an independent group of qualified experts organized by the clinical trial sponsor, known as an Independent Data Monitoring
Committee (“IDMC”). The IDMC receives special access to un-blinded data during the clinical trial and may halt the clinical trial
if it determines that there is an unacceptable safety risk for subjects or other grounds, such as no demonstration of efficacy. We
may also suspend or terminate a clinical trial based on evolving business objectives and/or competitive climate.
Assuming successful completion of all required testing in accordance with all applicable regulatory requirements, detailed
product development information is submitted to the FDA in the form of an NDA or sNDA requesting approval to market the
product for one or more indications.
The application includes all relevant data available from pertinent non-clinical and clinical trials, including negative or
ambiguous results, as well as positive findings, together with detailed information relating to the product’s chemistry,
manufacturing, controls and proposed labeling, among other things. Data can come from company-sponsored clinical trials
intended to test the safety and effectiveness of a use of a product, or from a number of alternative sources, including studies
initiated by investigators. To support marketing approval, the data submitted must be sufficient in quality and quantity to
establish the safety and effectiveness of the product candidate to the satisfaction of the FDA.
Once the marketing application submission has been accepted for filing, the FDA’s goal is to review applications within 10
months of acceptance for filing or, if the sponsor has been granted priority review designation, on the basis of an improvement in
the treatments of a serious condition, six months from acceptance for filing. The review process is often significantly extended by
FDA requests for additional information or clarification. The FDA may refer the application to an advisory committee for review,
evaluation and recommendation as to whether the application should be approved. The FDA is not bound by the recommendation
of an advisory committee, but it typically follows such recommendations.
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After the FDA evaluates the NDA or sNDA and conducts inspections of clinical research facilities and/or manufacturing
facilities where the drug product and/or its API will be produced, it may issue an approval letter or a Complete Response Letter.
An approval letter authorizes commercial marketing of the drug with specific prescribing information for specific indications. A
Complete Response Letter indicates that the review cycle of the application is complete, and the application is not ready for
approval. A Complete Response Letter may require additional clinical data and/or an additional pivotal Phase 3 clinical trial(s),
and/or other significant, expensive and time-consuming requirements related to clinical trials, non-clinical studies or
manufacturing. Even if such additional information is submitted, the FDA may ultimately decide that the application does not
satisfy the criteria for approval. The FDA could also approve the NDA with a Risk Evaluation and Mitigation Strategies plan to
mitigate risks, which could include medication guides, physician communication plans or elements to assure safe use, such as
restricted distribution methods, patient registries and other risk minimization tools. The FDA also may condition approval on,
among other things, changes to proposed labeling, development of adequate controls and specifications or a commitment to
conduct one or more post-market studies or clinical trials. Such post-market testing may include Phase IV clinical trials and
surveillance to further assess and monitor the product’s safety and effectiveness after commercialization. Regulatory approval of
oncology products often requires that patients in clinical trials be followed for long periods to determine the overall survival
benefit of the drug.
Products manufactured or distributed pursuant to FDA approvals are subject to continuing regulation by the FDA, including
recordkeeping requirements and reporting of adverse experiences with the drug. Adverse event experience with the product must
be reported to the FDA in a timely fashion and pharmacovigilance programs to proactively look for these adverse events are
mandated by the FDA. Newly discovered or developed safety or effectiveness data may require changes to a product’s approved
labeling, including the addition of new warnings and contraindications and also may require the implementation of other risk
management measures.
Drug manufacturers and their subcontractors are required to register their establishments with the FDA and certain state
agencies and are subject to periodic unannounced inspections by the FDA and certain state agencies for quality and compliance,
which impose certain procedural and documentation requirements upon us and our third-party manufacturers. Following such
inspections, the FDA may issue notices on Form FDA 483 and Warning Letters that could cause us to modify certain activities. A
Form FDA 483 notice, if issued at the conclusion of an FDA inspection, can list conditions the FDA investigators believe may
have violated cGMP or other FDA regulations or guidance. Failure to adequately and promptly correct the observations(s) can
result in further regulatory enforcement action. In addition to Form FDA 483 notices and Warning Letters, failure to comply with
the statutory and regulatory requirements can subject a manufacturer to possible legal or regulatory action, such as suspension of
manufacturing, seizure of product, injunctive action or possible civil penalties. In addition, changes to the manufacturing process
are strictly regulated, and, depending on the significance of the change, may require prior FDA approval before being
implemented. FDA regulations also require investigation and correction of any deviations from cGMP and impose reporting and
documentation requirements upon us and any third-party manufacturers that we may decide to use. Accordingly, manufacturers
must continue to expend time, money and effort in the area of production and quality control to maintain compliance with cGMP
and other aspects of regulatory compliance.
Government Regulation Outside of the United States
In addition to regulations in the United States, we are subject to a variety of regulations in other jurisdictions governing,
among other things, clinical trials and any commercial sales and distribution of our products. The approval process and
requirements governing the conduct of clinical trials, product licensing, pricing, and reimbursement vary greatly from country to
country, and the time may be longer or shorter than that required for FDA approval.
Regardless of whether we hold FDA approval for a product, we must obtain the requisite approvals from regulatory authorities
in foreign countries prior to the commencement of clinical trials or marketing of the product in those countries. Certain countries
outside of the United States have a similar process that requires the submission of a clinical trial application much like the IND
prior to the commencement of human clinical trials. In Europe, for example, a clinical trial application, (“CTA”) must be
submitted to each country’s national health authority and an independent ethics committee, much like the FDA and IRB,
respectively. Once the CTA is approved in accordance with a country’s requirements, clinical trial development may proceed.
Medicines can be authorized in the EU by using either the centralized authorization procedure or national authorization
procedures. Under the centralized procedure, marketing authorization applications are submitted to the
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EMA whose CHMP reviews the application and issues an opinion on it. The opinion is considered by the EC which is
responsible for deciding applications. If the application is approved, the EC grants a single marketing authorization that is valid
for all EU member states as well as Iceland, Liechtenstein and Norway. The centralized procedure is compulsory for human
medicines that contain a new active substance indicated for the treatment of certain diseases, including cancer.
The national authorization procedures, the decentralized and mutual recognition procedures, are available for products for
which the centralized procedure is not compulsory. Using the decentralized procedure, an applicant may apply for simultaneous
authorization in more than one EU country of medicinal products that have not yet been authorized in any EU country and that do
not fall within the mandatory scope of the centralized procedure. Under the mutual recognition procedure, a medicine is first
authorized in one EU Member State, in accordance with the national procedures of that country. Following this, further marketing
authorizations can be sought from other EU countries in a procedure whereby the countries concerned agree to recognize the
validity of the original, national marketing authorization.
As result of the United Kingdom (“UK”) leaving the EU, the UK is no longer part of the harmonized EU medicines network.
The UK government introduced legislation to allow the continued registration, sale and access to medicinal products including
regulation to allow implementation of the Northern Ireland Protocol. A comprehensive national regime for the authorization of
medicinal products for human use; for the manufacture, import, distribution, sale and supply of those products; for their labelling
and advertising; and for pharmacovigilance have been introduced. In Northern Ireland the, EU regulations will continue to apply
in accordance with the Northern Ireland Protocol.
Available Special Regulatory Procedures
Formal Meetings
We are encouraged to engage and seek guidance from health authorities relating to the development and review of
investigational drugs, as well as marketing applications. In the United States, there are different types of official meetings that
may occur between us and the FDA. Each meeting type is subject to different procedures. Conclusions and agreements from each
of these meetings are captured in the official final meeting minutes issued by the FDA.
The EMA also provides the opportunity for dialogue with us. This is usually done in the form of Scientific Advice, which is
given by the Scientific Advice Working Party of CHMP. A fee is incurred with each Scientific Advice meeting.
Advice from either the FDA or EMA is typically provided based on questions concerning, for example, quality (chemistry,
manufacturing and controls testing), nonclinical testing and clinical studies and pharmacovigilance plans and risk-management
programs. Such advice is not legally binding on the sponsor. To obtain binding commitments from the FDA in the United States,
Special Protocol Assessment (“SPA”) procedures are available. A SPA is an evaluation by the FDA of a protocol with the goal of
reaching an agreement with the sponsor that the protocol design, clinical endpoints and statistical analyses are acceptable to
support regulatory approval of the product candidate with respect to effectiveness in the indication studied. The FDA’s agreement
to a SPA is binding upon the FDA except in limited circumstances, such as if the FDA identifies a substantial scientific issue
essential to determining the safety or effectiveness of the product after clinical studies begin, or if the study sponsor fails to
follow the protocol that was agreed upon with the FDA. There is no guarantee that a study will ultimately be adequate to support
an approval even if the study is subject to a SPA.
Orphan Drug Designation
The FDA may grant orphan drug designation to drugs intended to treat a rare disease or condition that affects fewer than
200,000 individuals in the United States, or if it affects more than 200,000 individuals in the United States and there is no
reasonable expectation that the cost of developing and making the drug for this type of disease or condition will be recovered
from sales in the United States. In the EU, the EMA’s Committee for Orphan Medicinal Products grants orphan drug designation
to promote the development of products that are intended for the diagnosis, prevention or treatment of life-threatening or
chronically debilitating conditions affecting not more than five in 10,000 persons in the EU Community. Additionally,
designation is granted for products intended for the diagnosis, prevention or treatment of a life-threatening, seriously debilitating
or serious and chronic condition and when, without incentives, it is unlikely that
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sales of the drug in the EU would be sufficient to justify the necessary investment in developing the drug or biological product.
In the United States, orphan drug designation entitles a party to financial incentives such as opportunities for grant funding
towards clinical trial costs, tax advantages and user-fee waivers. In addition, if a product receives the first FDA approval for the
indication for which it has orphan designation, the product is entitled to orphan drug exclusivity, which means the FDA may not
approve any other application to market the same drug for the same indication for a period of seven years, except in limited
circumstances, such as a showing of clinical superiority over the product with orphan exclusivity.
In Europe, orphan drug designation also entitles a party to financial incentives such as reduction of fees or fee waivers and 10
years of market exclusivity is granted following drug or biological product approval. This period may be reduced to six years if
the orphan drug designation criteria are no longer met, including where it is shown that the product is sufficiently profitable not
to justify maintenance of market exclusivity.
Orphan drug designation must be requested before submitting an application for marketing approval. Orphan drug designation
does not convey any advantage in, or shorten the duration of, the regulatory review and approval process.
Pediatric Development
In the United States, the FDCA provides for an additional six months of marketing exclusivity for a drug if reports are filed of
investigations studying the use of the drug product in a pediatric population in response to a written request from the FDA.
Separate from this potential exclusivity benefit, NDAs must contain data (or a proposal for post-marketing activity) to assess the
safety and effectiveness of an investigational drug product for the claimed indications in all relevant pediatric populations in
order to support dosing and administration for each pediatric subpopulation for which the drug is safe and effective. The FDA
may, on its own initiative or at the request of the applicant, grant deferrals for submission of some or all pediatric data until after
approval of the product for use in adults or full or partial waivers if certain criteria are met. Discussions about pediatric
development plans can be discussed with the FDA at any time, but usually occur any time between the end-of-Phase II meeting
and submission of the NDA.
For the EMA, a Pediatric Investigation Plan, and/or a request for waiver or deferral, has to be agreed prior to submitting an
initial marketing authorization application and prior to submitting a variation to an existing Marketing Authorization to add an
additional indication.
Breakthrough Therapy Designation in the United States
The U.S. Congress created the Breakthrough Therapy designation program as a result of the passage of the Food and Drug
Administration Safety and Innovation Act of 2012. FDA may grant Breakthrough Therapy status to a drug intended for the
treatment of a serious condition when preliminary clinical evidence indicates that the drug may demonstrate substantial
improvement over existing therapies on one or more clinically significant endpoints. The Breakthrough Therapy designation,
which may be requested by a sponsor when filing or amending an IND, is intended to facilitate and expedite the development and
FDA review of a product candidate. Specifically, the Breakthrough Therapy designation may entitle the sponsor to more frequent
meetings with the FDA during drug development, intensive guidance on clinical trial design and expedited FDA review by a
cross-disciplinary team comprised of senior managers. The designation does not guarantee a faster development or review time as
compared to other drugs, however, nor does it assure that the drug will obtain ultimate marketing approval by the FDA. Once
granted, the FDA may withdraw this designation at any time.
Expedited Review and Approval in the United States
The FDA has various programs, including Fast Track, priority review and accelerated approval, which are intended to
expedite or simplify the process for reviewing drugs and biologics, and/or provide for the approval of a drug or biologic on the
basis of a surrogate endpoint. Even if a drug qualifies for one or more of these programs, the FDA may later decide that the drug
no longer meets the conditions for qualification or that the time period for FDA review or approval will be shortened. Generally,
drugs that are eligible for these programs are those for serious or life-threatening conditions, those with the potential to address
unmet medical needs and those that offer meaningful benefits over existing treatments. For example, based on results of the
Phase 3 clinical trial(s) submitted in an NDA, upon the request
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of an applicant, the FDA may grant the NDA a priority review designation, which sets the target date for FDA action on the
application at six months from the 60-day filing date, if the drug is a new molecular entity, rather than to the standard FDA
review period of 10 months. Priority review is granted where preliminary estimates indicate that a product, if approved, has the
potential to provide a safe and effective therapy where no satisfactory alternative therapy exists, or a significant improvement
compared to marketed products is possible. Priority review designation does not change the scientific/medical standard for
approval or the quality of evidence necessary to support approval.
Fast Track is a designation which is more similar to the Breakthrough Therapy designation, but is granted based on
preliminary data including non-clinical or mechanistic data, and allows more frequent communication with FDA to expedite drug
development
Accelerated approval provides for an earlier approval for a new drug that is intended to treat a serious or life-threatening
disease or condition upon a determination that the product has an effect on a surrogate endpoint that is reasonably likely to
predict clinical benefit and is better than available therapy. A surrogate endpoint is a laboratory measurement or physical sign
used as an indirect or substitute measurement representing a clinically meaningful outcome. The FDA will also consider the
severity, rarity or prevalence of the condition. As a condition of approval for drugs granted accelerated approval, one or more
post-marketing confirmatory studies are required to confirm as predicted by the surrogate marker trial an effect on clinical
benefit, which is defined as having a positive effect on how a patient feels, functions or survives.
Accelerated Review in the European Union
Under the Centralized Procedure in the EU, the maximum timeframe for the evaluation of a marketing authorization
application is 210 days (excluding clock stops, when additional written or oral information is to be provided by the applicant in
response to questions asked by the CHMP). Accelerated evaluation might be granted by the CHMP in exceptional cases, when a
medicinal product is expected to be of a major public health interest, defined by three cumulative criteria: the seriousness of the
disease (e.g. heavy disabling or life-threatening diseases) to be treated; the absence or insufficiency of an appropriate alternative
therapeutic approach; and anticipation of high therapeutic benefit. In this circumstance, EMA ensures that the opinion of the
CHMP is given within 150 days of submission of the MAA, excluding clock stops.
Pharmaceutical Coverage, Pricing and Reimbursement
Significant uncertainty exists as to the coverage and reimbursement status of Rubraca and any other drug products for which
we obtain regulatory approval. In the United States and markets in other countries, sales of approved pharmaceutical products
depend in part on the availability of reimbursement from third-party payors. Third-party payors include government health
administrative authorities, managed care providers, public and private health insurers and other organizations. The process for
determining whether a payor will provide coverage for a drug product may be separate from the process for setting the price or
reimbursement rate that the payor will pay for the drug product. Third-party payors may limit coverage to specific drug products
on an approved list, or formulary, which might not include all of the FDA-approved or European Commission/specific country-
approved drugs for a particular indication (or all indications for an approved drug). Third-party payors are increasingly
challenging the price and examining the medical necessity and cost-effectiveness of medical products and services and imposing
controls to manage costs. We may need to conduct expensive pharmacoeconomic studies in order to demonstrate the medical
necessity and cost effectiveness of our products, in addition to the costs required to obtain approvals. The development of a
product dossier and a Budget Impact Model may be helpful in assisting the payors in evaluating cost effectiveness. In any event,
our approved products may not be considered medically necessary or cost-effective. A payor’s decision to provide coverage for a
drug product does not imply that an adequate reimbursement rate will be established. Adequate third-party reimbursement may
not be available to enable us to maintain price levels sufficient to realize an appropriate return on our investment in product
development. Third-party payors impose price protection in their contracts with manufacturers to limit the manufacturer’s ability
to increase price in exchange of providing equal access to the drug product vs. other competing drugs.
There have been a number of federal and state proposals in recent years regarding the pricing of pharmaceutical products,
government control and other changes to the healthcare system of the United States. The U.S. government enacted legislation
providing a partial prescription drug benefit for Medicare beneficiaries. Government payment for some of the costs of
prescription drugs may increase demand for any products for which we receive marketing approval;
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however, to obtain payments under this program, we are required to sell products to Medicare recipients through prescription
drug plans operating pursuant to this legislation. These plans will likely negotiate discounted prices for our products.
Additionally, the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act
(collectively, the “Affordable Care Act”) was enacted in 2010 with a goal of reducing the cost of healthcare and substantially
changing the way healthcare is financed by both government and private insurers. Among other cost containment measures, the
Affordable Care Act established:
● An annual, nondeductible fee on any entity that manufactures or imports certain branded prescription drugs and biologic
agents;
● A Medicare Part D coverage gap discount program, in which pharmaceutical manufacturers who wish to have their
drugs covered under Part D must offer discounts to eligible beneficiaries during their coverage gap period (the “donut
hole”); and
● A formula that increases the rebates a manufacturer must pay under the Medicaid Drug Rebate Program.
Since its enactment, there have been legal and Congressional challenges to repeal and replace certain aspects of the Affordable
Care Act . Most recently, the Tax Cuts and Jobs Act was enacted, which, among other things, removed penalties for not
complying with Affordable Care Act’s individual mandate to carry health insurance. The Trump administration pursued several
initiatives designed to delay the implementation of certain provisions of the Affordable Care Act or otherwise circumvent some
of the requirements for health insurance mandated by the Affordable Care Act. There is uncertainty with respect to the impact
President Biden’s administration and the U.S. Congress may have, if any, and any changes will likely take time to unfold, and
could have an impact on coverage and reimbursement for healthcare items and services covered by plans that were authorized by
the Affordable Care Act.
Recently there has been heightened governmental scrutiny over the manner in which manufacturers set prices for their
marketed products, which has resulted in several Congressional inquiries and proposed bills designed to, among other things,
reform government program reimbursement methodologies. Individual states in the United States have also become increasingly
active in implementing regulations designed to control pharmaceutical product pricing, including price or patient reimbursement
constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in
some cases, designed to encourage importation from other countries and bulk purchasing. We expect that federal, state and local
governments in the United States will continue to consider legislation to limit the growth of healthcare costs, including the cost of
prescription drugs. Future legislation could limit payments for pharmaceuticals such as our products.
Moreover, payment methodologies, including payment for companion diagnostics, have been subject to changes due to
healthcare legislation and regulatory initiatives. For example, the Centers for Medicare and Medicaid Services(“CMS”) began
bundling the Medicare payments for certain laboratory tests ordered while a patient received services in a hospital outpatient
setting. Additionally, on April 1, 2014, the Protecting Access to Medicare Act of 2014, or PAMA, was signed into law, which,
among other things, significantly alters the current payment methodology under the Clinical Laboratory Fee Schedule. Beginning
on January 1, 2018, the Medicare payment rate for each clinical diagnostic lab test, with some exceptions, is equal to the
weighted median private payer payment for the test, as calculated using data collected by applicable laboratories during the data
collection period and reported to CMS during a specified data reporting period. Also under PAMA, CMS is required to adopt
temporary billing codes to identify new clinical diagnostic laboratory tests and advanced diagnostic laboratory tests that do not
already have unique diagnostic codes, and that have been cleared or approved by the FDA.
Different pricing and reimbursement schemes exist in other countries and vary widely from country to country. In Europe,
governments influence the price of pharmaceutical products through their pricing and reimbursement rules and control of national
health care systems that fund the cost of those products to consumers. These jurisdictions operate a system under which products
may only be marketed once a reimbursement price has been agreed for a defined population that, depending on country-specific
negotiations, could be equal to European Commission-granted indication or a restricted population. To obtain reimbursement and
pricing approval in Europe, some of these European countries may require additional economic evidence. In European countries,
repeating price/reimbursement negotiations take place depending on local healthcare situations and can lead to lower reimbursed
prices over time.
The downward pressure on health care costs in general, particularly prescription drugs, has become very intense. As a result,
increasing high barriers are being erected to the entry of new products. In addition, in some countries, especially in Europe, cross-
border imports from low-priced markets exert a commercial pressure on pricing within a country. In
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particular, for each new indication, new negotiations are required to obtain reimbursement in European countries; also, pricing
negotiations in European countries are often linked to baskets of comparator countries; due to Brexit, it is currently unclear
whether changes in country baskets will take place anytime soon. There can be no assurance that any country that has price
controls or reimbursement limitations for pharmaceutical products will allow favorable reimbursement and pricing arrangements
for any of our products. Historically, products launched in Europe do not follow price structures of the United States and
generally prices tend to be significantly lower.
The marketability of any products for which we receive regulatory approval for commercial sale may be impacted by
government and third-party coverage and reimbursement decisions. In addition, emphasis on reducing the rate of healthcare
spending in the United States has increased, and we expect will continue to increase the pressure on pharmaceutical pricing.
There has been particular and increasing legislative interest in the United States with respect to drug pricing practices,
particularly with respect to drugs that have been subject to relatively large price increases over relatively short time periods.
Certain independent charitable foundations operate programs that provide grants to defray medical expenses (including cost-
sharing obligations for drug treatments and health insurance premiums) for patients who meet certain financial need criteria and
suffer from specific chronic illnesses or rare disorders. There has been recent enforcement interest regarding donations by
pharmaceutical manufacturers to such foundations on the bases that such donations were used in part to guide patients to those
donors’ products or that the donors obtained data on how the donations were used, including how often donations correlate to the
frequency of referrals to donors’ products. There have been several U.S. Congressional inquiries and proposed bills designed to,
among other things, bring more transparency to drug pricing, review the relationship between pricing and manufacturer patient
programs, and reform government program reimbursement methodologies for drugs.
Coverage policies and third-party reimbursement rates may change at any time in the U.S. and Europe. Even if favorable
coverage and reimbursement status is attained for one or more products for which we receive regulatory approval, less favorable
coverage policies and reimbursement rates may be implemented in the future. The implementation of cost containment measures
or other healthcare reforms may prevent us from being able to generate revenue, attain profitability or commercialize our
products.
Advertising and Promotion
The FDA and other U.S. federal regulatory agencies closely regulate the marketing and promotion of drugs through, among
other things, the FDCA and the FDA’s implementing regulations and standards. The FDA’s review of marketing and promotional
activities encompasses, but is not limited to, direct-to-consumer advertising, healthcare provider-directed advertising and
promotion, sales representative communications to healthcare professionals, communications regarding unapproved or “off-
label” uses, industry sponsored scientific and educational activities and promotional activities involving the internet. A product
cannot be commercially promoted before it is approved. After approval, product promotion can include only those claims relating
to safety and effectiveness that are consistent with the labeling approved by the FDA. FDA regulations also impose stringent
restrictions on manufacturers’ communications regarding off-label uses. Failure to comply with applicable FDA requirements and
restrictions regarding unapproved uses of a drug or for other violations of its advertising and labeling laws and regulations, may
result in adverse publicity and enforcement action by the FDA, the Department of Justice or the Office of the Inspector General
of the Department of Health and Human Services, as well as state authorities. A range of penalties are possible that could have
significant commercial consequences, including product seizures, injunctions, administrative remedies, civil and/or criminal
fines, agreements that materially restrict the manner in which a company promotes or distributes its products, or regulatory
enforcement letters which may require corrective advertising or other corrective communications to healthcare professionals or
consumers.
Other Healthcare Laws and Compliance Requirements
We are subject to various laws targeting fraud and abuse in the healthcare industry, including federal and state anti-kickback
laws and false-claims laws. Violations of these laws can lead to civil and criminal penalties, including fines, imprisonment and
administrative remedies such as exclusion from participation in federal healthcare programs.
The federal Anti-Kickback Statute prohibits persons from knowingly and willfully soliciting, receiving, offering or paying
remuneration, directly or indirectly, to induce either the referral of an individual, or the furnishing, recommending, or arranging
for a good or service, for which payment may be made under a federal healthcare program, such as Medicare and Medicaid. The
reach of the Anti-Kickback Statute was broadened by the Affordable Care Act,
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which, among other things, amended the intent requirement of the federal Anti-Kickback Statute and criminal healthcare fraud
statutes contained within 42 U.S.C. § 1320a-7b. Pursuant to the statutory amendment, a person or entity no longer needs to have
actual knowledge of the federal Anti-Kickback Statute or specific intent to violate it in order to have committed a violation. In
addition, the government may assert that a claim submitted in violation of the federal Anti-Kickback Statute constitutes a false or
fraudulent claim for purposes of the civil False Claims Act (discussed below) or the civil monetary penalties statute. Many states
have adopted laws similar to the federal Anti-Kickback Statute, some of which apply to the referral of patients for healthcare
items or services reimbursed by any source, not only the Medicare and Medicaid programs.
The federal civil False Claims Act imposes liability on any person who, among other things, knowingly presents, or causes to
be presented, a false or fraudulent claim for payment by a federal program, including federal healthcare programs. The “qui tam”
provisions of the False Claims Act allow a private individual to bring civil actions on behalf of the federal government alleging
that the defendant has submitted a false claim to the federal government, and to share in any monetary recovery. In addition,
various states have enacted false claims laws analogous to the False Claims Act. Many of these state laws apply where a claim is
submitted to any third-party payor and not merely a federal healthcare program. When an entity is determined to have violated
the federal False Claims Act, it may be required to pay up to three times the actual damages sustained by the government, plus
civil fines and penalties.
In addition, a person who offers or transfers to a Medicare or Medicaid beneficiary any remuneration, including waivers of co-
payments and deductible amounts (or any part thereof), that the person knows or should know is likely to influence the
beneficiary’s selection of a particular provider, practitioner or supplier of Medicare or Medicaid-payable items or services, may
be liable for civil monetary penalties of up to $20,000 for each wrongful act. Moreover, in certain cases, providers who routinely
waive copayments and deductibles for Medicare and Medicaid beneficiaries can also be held liable under the federal Anti-
kickback Statute and False Claims Act, which can impose additional penalties. One of the statutory exceptions to this prohibition
is non-routine, unadvertised waivers of copayments or deductible amounts based on individualized determinations of financial
need or exhaustion of reasonable collection efforts. The Office of Inspector General of the Department of Health and Human
Services emphasizes, however, that this exception should only be used occasionally to address special financial needs of a
particular patient. Although this prohibition applies only to federal healthcare program beneficiaries, the routine waivers of
copayments and deductibles offered to patients covered by commercial payers may implicate applicable state laws related to,
among other things, unlawful schemes to defraud, excessive fees for services, tortious interference with patient contracts and
statutory or common law fraud. To the extent our patient assistance programs are found to be inconsistent with applicable laws,
we may be required to restructure or discontinue such programs or be subject to significant penalties.
In addition to the laws described above, drug manufacturers must report to CMS payments made to physicians and teaching
hospitals, as well as ownership and investment interests held by physicians and their immediate family members. Failure to
submit required information to CMS may result in civil monetary penalties of up to an aggregate of $176,495 per year (or up to
an aggregate of $1.176 million per year for “knowing failures”), adjusted for inflation, for all payments, transfers of value, or
ownership or investment interests that are not timely, accurately and completely reported in an annual submission. Applicable
drug manufacturers are required to collect data for each calendar year and submit reports to CMS by March 31st of each
subsequent calendar year. In addition, there is also an increasing number of state laws that require manufacturers to make reports
to states on pricing and marketing information. These laws impose administrative and compliance burdens that may affect our
sales, marketing, and other promotional activities.
For marketed products which are covered in the United States by the Medicaid program, we have various obligations,
including government price calculation and reporting and rebate requirements which generally require products be offered at
substantial rebates/discounts to Medicaid and certain purchasers (including “covered entities” purchasing under the 340B Drug
Discount Program). We are also required to discount such products to authorized users of the Federal Supply Schedule of the
General Services Administration, under which additional laws and requirements apply. These programs require submission of
pricing data and calculation of discounts and rebates pursuant to complex statutory formulas, as well as the execution of
government procurement contracts governed by the Federal Acquisition Regulations. The guidance governing such calculations
is not always clear and may require significant investment in personnel, systems and resources in order to comply. Failure to
properly calculate our prices, or offer required discounts or rebates could subject us to substantial penalties.
One component of the rebate and discount calculations under the Medicaid and 340B programs is the “additional rebate”, a
complex calculation which is based, in part, on the rate at which a branded drug’s price increases over time as
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compared to the rate of inflation (based on the CPI-U published by the United States Department of Labor). This calculation is
based on the baseline pricing data for the first full quarter of sales associated with a branded drug’s NDA, and baseline data
cannot generally be reset, even on transfer of the NDA to another manufacturer. This “additional rebate” calculation can, in some
cases where price increases have been relatively high versus the first quarter of sales of the NDA, result in Medicaid rebates up to
100% of a drug’s “average manufacturer price” and 340B prices of one penny. Separately, subject to the control of Directive
89/105/EEC, pricing and reimbursement in the EU/EEA (“European Economic Area”) is governed by national rules and policies
and may vary from Member State to Member State.
Also, the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”) outlines several federal crimes, including
health care fraud and false statements relating to health care matters. Most healthcare providers who are expected to prescribe our
products and from whom we obtain patient health information are subject to privacy and security requirements under HIPAA.
Although we are not directly subject to HIPAA, we could be subject to criminal penalties if we knowingly obtain individually
identifiable health information from a HIPAA-covered entity in a manner that is not authorized or permitted by HIPAA. Similar
to the federal Anti-Kickback Statute, a person or entity does not need to have actual knowledge of the statute or specific intent to
violate it in order to have committed a violation.
The privacy and protection of consumer information remains a developing area and we continue to monitor legislative and
regulatory developments both in the United States as well as Europe. For example, the California Consumer Privacy Act
(“CCPA”) became effective on January 1, 2020 and, as enacted, requires us to make new disclosures to consumers about our data
collection, use, and sharing practices. It also provides a cause of action for data breaches. Beyond California, many other states
are developing their own data privacy protections, which, along with the CCPA, could create liability for us or increase our cost
of doing business. Other countries also have, or are developing, laws governing the collection, use and transmission of personal
information. For example, the General Data Protection Regulation (Regulation (EU) 2016/679), the U.K.’s Data Protection Act
2018 and the Swiss Federal Data Protection Act and Data Protection Ordinance, regulate the processing of personal data within
the U.K., the EU and between countries in the EU, U.K. and countries outside of the EU and U.K., including the U.S. Failure to
provide adequate privacy protections and maintain compliance with the EU, U.K. and Swiss Privacy Laws, could jeopardize
business transactions across borders and result in significant penalties. Similar to the impact of the CCPA or other U.S. state
frameworks, these European laws could create liability for us or increase our cost of doing business.
Regulation of Diagnostic Tests
In the United States, the FDCA and its implementing regulations, and other federal and state statutes and regulations govern,
among other things, medical device design and development, non-clinical and clinical testing, premarket clearance or approval,
registration and listing, manufacturing, labeling, storage, advertising and promotion, sales and distribution, export and import,
and post-market surveillance. Diagnostic tests are classified as medical devices under the FDCA. Unless an exemption applies,
diagnostic tests require marketing clearance or approval from the FDA prior to commercial distribution, depending on their
classification by FDA.
In the United States, devices are classified into one of three classes (Class I, II, or III) based on the controls deemed necessary
by the FDA to reasonably ensure their safety and effectiveness. Class I and II devices are subject to general controls including,
but not limited to, performance standards, premarket notification, also called 510(k) clearance, and post market surveillance.
Class III devices are those that either support or sustains human life, are of substantial importance in preventing impairment of
human health, or present a potential, unreasonable risk of illness or injury. Class III devices are subject to more rigorous review
and approval requirements than Class I or II, known as a premarket approval, or PMA approval. Because the diagnostic tests
being developed by our third-party collaborators are of substantial importance in preventing impairment of human health, they
are considered Class III devices, subject to the PMA approval process.
PMA applications must be supported by valid scientific evidence, which typically requires extensive data, including technical,
non-clinical, clinical and manufacturing data, to demonstrate to the FDA’s satisfaction the safety and effectiveness of the device.
For diagnostic tests, a PMA application typically includes data regarding analytical and clinical validation studies. As part of its
review of the PMA, the FDA will conduct a pre-approval inspection of the manufacturing facility or facilities to ensure
compliance with the Quality System Regulation, or QSR, which requires manufacturers to follow design, testing, control,
documentation and other quality assurance procedures. FDA review of an initial PMA application is required by statute to take
between six to ten months, although the process typically takes longer, and may require several years to complete. If the FDA
evaluations of both the PMA application and the
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manufacturing facilities are favorable, the FDA will either issue an approval letter or an approvable letter, which usually contains
a number of conditions that must be met in order to secure the final approval of the PMA. If the FDA’s evaluation of the PMA or
manufacturing facilities is not favorable, the FDA will deny approval of the PMA or issue a not approvable letter. A not
approvable letter will outline the deficiencies in the application and, where practical, will identify what is necessary to make the
PMA approvable. The FDA may also determine that additional clinical trials are necessary, in which case the PMA approval may
be delayed for several months or years while the trials are conducted and then the data submitted in an amendment to the PMA.
Once granted, PMA approval may be withdrawn by the FDA if compliance with post approval requirements, conditions of
approval or other regulatory standards is not maintained, or problems are identified following initial marketing.
We and our third-party collaborators who are developing companion diagnostics work cooperatively to generate the data
required for submission with a PMA application, and remain in close contact with the Center for Devices and Radiological
Health (“CDRH”) at the FDA to ensure that any changes in requirements are incorporated into the development plans. Meetings
with the FDA with regard to our drug product candidates, as well as companion diagnostic product candidates, typically include
representatives from the Center for Drug Evaluation and Research and CDRH when appropriate to ensure that the NDA and
PMA submissions are coordinated to enable FDA to conduct a parallel review of both submissions. The FDA has issued guidance
documents addressing the development and approval process for “In Vitro Companion Diagnostic Devices.” According to these
guidance documents, for novel therapeutic products such as our product candidates, the PMA for a companion diagnostic device
should generally be developed and approved or cleared contemporaneously with the therapeutic.
In the EEA, in vitro medical devices are required to conform to the essential requirements of the E.U. Directive on in vitro
diagnostic medical devices (Directive No 98/79/EC, as amended). To demonstrate compliance with the essential requirements,
the manufacturer must undergo a conformity assessment procedure. The conformity assessment varies according to the type of
medical device and its classification. For low-risk devices, the conformity assessment can be carried out internally, but for higher
risk devices it requires the intervention of an accredited EEA Notified Body. If successful, the conformity assessment concludes
with the drawing up by the manufacturer of an EC Declaration of Conformity entitling the manufacturer to affix the CE mark to
its products and to sell them throughout the EEA. The data generated for the U.S. registration will be sufficient to satisfy the
regulatory requirements for the EU and other countries.
Patents and Proprietary Rights
The proprietary nature of, and protection for, our product candidates, technology and know-how are important to our business.
Our success depends in part on our ability to protect the proprietary nature of our product candidates, technology, and know-how,
to operate without infringing on the proprietary rights of others, and to prevent others from infringing our proprietary rights. We
seek patent protection in the United States and internationally for our product candidates and other technology. Our policy is to
patent or in-license the technology, inventions and improvements that we consider important to the development of our business.
We also rely on trade secrets, know-how and continuing innovation to develop and maintain our competitive position. We cannot
be sure that patents will be granted with respect to any of our pending patent applications or with respect to any patent
applications filed by us in the future, nor can we be sure that any of our existing patents or any patents granted to us in the future
will be commercially useful in protecting our technology.
In June 2011, we obtained an exclusive, worldwide license from Pfizer to develop and commercialize rucaparib. In April
2012, we obtained an exclusive license from AstraZeneca under a family of patents and patent applications which permits the
development and commercialization of rucaparib for certain methods of treating patients with PARP inhibitors.
We were granted patent term extension to November 22, 2023 under the Drug Price Competition and Patent Term Restoration
Act of 1984 (the “Hatch-Waxman Act”) for U.S. Patent 6,495,541 directed to the rucaparib composition of matter. Additionally,
other patents and patent applications are directed to methods of making, methods of using, dosing regimens, various salt and
polymorphic forms, and formulations with expiration dates through potentially 2035. These patents and patent applications
include the rucaparib camsylate salt/polymorph patent family licensed from Pfizer, which expires in 2031, and a patent family
directed to high dosage strength rucaparib tablets, which expires in 2035. To date, the rucaparib camsylate salt/polymorph patents
issued in 51 jurisdictions (including the United States and Europe), with applications pending in 7 jurisdictions. Patents directed
to the high dosage strength rucaparib tablets, including all
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commercial dosage strengths, issued in the United States and 5 other jurisdictions, and applications are pending in 13
jurisdictions, including before the European Patent Office. United States patents with claims that cover Rubraca and its uses are
listed in the FDA’s Approved Drug Products with Therapeutic Equivalence Evaluations, commonly known as the Orange Book.
Because Rubraca does not contain a previously approved active ingredient, the Hatch-Waxman Act provides a five-year
period of new chemical entity (“NCE”) exclusivity following its December 19, 2016 approval during which time generic
competitors cannot file an Abbreviated New Drug Application (“ANDA”) for a generic version of Rubraca, unless the
submission contains a Paragraph IV Certification that one or more patents listed in the Orange Book for Rubraca are invalid,
unenforceable or will not be infringed by a proposed ANDA product, in which case the submission may be made four years
following the original drug approval. That is, under the provisions of the Hatch-Waxman Act, December 19, 2020 was the
earliest date that a generic competitor could submit an ANDA to the FDA requesting permission to market a generic version of
Rubraca. To date, we do not have an indication that an ANDA has been filed. However, a generic company may have submitted
an ANDA, for which we would receive a Paragraph IV Notice Letter in the future. If a Paragraph IV Certification is made, the
generic company is required to provide a Paragraph IV Notice Letter advising Clovis of the certification. If that occurs, Clovis
will have the opportunity to bring a patent infringement action against the generic company. If such a suit is filed within the 45-
day period following receipt of the Paragraph IV Notice Letter, the Hatch-Waxman Act provides for a 30-month stay on FDA’s
ability to grant final approval of the proposed generic product. The 30-month stay generally runs from the date the Paragraph IV
Notice Letter is received. However, when a Paragraph IV certification is received during the five-year period of NCE exclusivity
following the date of first NDA approval, the thirty-month stay extends from five years after the date that product was first
approved. The 30-month stay may be shortened or lengthened, including due to a settlement of a lawsuit, a court order (including
a decision by the district court on the merits of the case), or patent expiration.
Two European patents in the rucaparib camsylate salt/polymorph patent family (European Patent 2534153 and its divisional
European Patent 3150610) were opposed. In particular, opposition notices against European Patent 2534153 were filed by two
parties on June 20, 2017. During an oral hearing that took place on December 4, 2018, the European Patent Office’s Opposition
Division maintained European Patent 2534153 in amended and narrowed form with claims to certain crystalline forms of
rucaparib camsylate, including, but not limited to, rucaparib S-camsylate Form A, the crystalline form in Rubraca. Clovis and one
opponent, Hexal AG, appealed the written decision of the European Opposition Division and filed reply appeal briefs in
November 2019. An opposition against European Patent 3150610 was filed by Generics (UK) Limited on April 30, 2020 on
grounds similar to those raised in the opposition notices against European Patent 2534153, which grounds are common in such
proceedings. Moreover, these grounds of opposition, as well as documents based on which lack of patentability has been alleged,
were considered by the European Patent Office during the examination stage, and the claims were deemed to comply with the
applicable law when granting the patent. Clovis responded to the opposition notice in European Patent 3150610 on January 8,
2021, amending the claims to be directed to the use of rucaparib maleate in a method of inhibiting PARP activity or treating
cancer. A preliminary opinion and summons to oral proceedings were issued on January 26, 2021. The oral hearing is scheduled
for November 18, 2021. The preliminary opinion provides a non-binding indication of the Opposition Division’s initial view
based on the documents that have thus far been submitted, which agrees with our positions on a number of grounds of opposition
and agrees with an objection made by the opponent, but only with respect to some of the claims. We have the opportunity to
submit further arguments and pursue alternative claims in the form of auxiliary requests. While the ultimate results of patent
challenges can be difficult to predict, it is our view that a number of factors support patentability, and we believe a successful
challenge of all claims would be difficult.
We have filed for patent term extension under a supplementary protection certificate for Rubraca based on European Patent
2534153 and believe that extension could be available to 2033. Additionally, in Europe, regulatory exclusivity is available for ten
years, plus one year for a new indication; therefore, we have regulatory exclusivity for Rubraca in Europe until 2028, and if an
additional indication is approved, until 2029.
We obtained rights to lucitanib by acquiring EOS in November 2013, along with its license agreement with Advenchen. We
have rights to develop and commercialize lucitanib on a global basis, excluding China. Composition of matter and method of use
patent protection for lucitanib and a group of structurally-related compounds is issued in the United States, Europe, and Japan and
is issued or pending in other jurisdictions. In the United States, the composition of matter patent will expire in 2030, and in other
jurisdictions, it expires in 2028. We believe that patent term extension could be available to extend our composition of matter
patent up to five years beyond the scheduled expiration under the
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Hatch-Waxman Act in the United States, and similar provisions in other jurisdictions. Additionally, patents directed to methods
of manufacturing lucitanib are issued in the United States, Europe, Japan, and China.
In September 2019, we acquired rights from 3BP to develop and commercialize a peptide-targeted radionuclide therapy
(“PTRT”) and imaging agent targeting fibroblast activation protein alpha (“FAP”), including FAP-2286. We hold global
development rights, and U.S. and global commercialization rights, excluding Europe (inclusive of Russia, Turkey and Israel),
where 3BP retains rights. Patent applications are pending that claim FAP-2286 generically and specifically (including with
respect to composition of matter) that, if issued, would have expiration dates in 2040.
In addition, we intend to seek patent protection whenever available for any products or product candidates and related
technology we acquire in the future.
The patent positions of pharmaceutical firms like us are generally uncertain and involve complex legal, scientific and factual
questions. In addition, the coverage claimed in a patent application can be significantly reduced before the patent is issued.
Consequently, we do not know whether any of the product candidates we acquire, or license will gain patent protection or, if any
patents are issued, whether they will provide significant proprietary protection or will be challenged, circumvented or invalidated.
Because patent applications in the United States and certain other jurisdictions are maintained in secrecy for 18 months, and since
publication of discoveries in the scientific or patent literature often lags behind actual discoveries, until that time we cannot be
certain that we were the first to file any patent application related to our product candidates. Moreover, we may have to
participate in interference proceedings declared by the United States Patent and Trademark Office (“U.S. PTO”) to determine
priority of invention or in opposition or other third-party proceedings in the U.S. or a foreign patent office, either of which could
result in substantial cost to us, even if the eventual outcome is favorable to us. There can be no assurance that the patents, if
issued, would be held valid by a court of competent jurisdiction. An adverse outcome in a third-party patent dispute could subject
us to significant liabilities to third parties, require disputed rights to be licensed from third parties or require us to cease using
specific compounds or technology.
The term of individual patents depends upon the legal term of the patents in the countries in which they are obtained. In most
countries or jurisdictions in which we file, the patent term is 20 years from the earliest date of filing a non-provisional patent
application. In the United States, a patent’s term may be lengthened by patent term adjustment, which compensates a patentee for
administrative delays by the U.S. PTO in granting a patent or may be shortened if a patent is terminally disclaimed over another
patent.
The patent term of a patent that covers an FDA-approved drug may also be eligible for patent term extension, which permits
patent term restoration as compensation for the patent term lost during the FDA regulatory review process. The Hatch-Waxman
Act permits a patent term extension of up to five years beyond the expiration of the patent. The length of the patent term
extension is related to the length of time the drug is under regulatory review. Patent extension cannot extend the remaining term
of a patent beyond a total of 14 years from the date of product approval and only one patent applicable to an approved drug may
be extended. Similar provisions are available in Europe and other non-U.S. jurisdictions to extend the term of a patent that covers
an approved drug. In the future, if and when our pharmaceutical products receive FDA approval, we expect to apply for patent
term extensions on patents covering those products.
To protect our rights to any of our issued patents and proprietary information, we may need to litigate against infringing third
parties, or avail ourselves of the courts or participate in hearings to determine the scope and validity of those patents or other
proprietary rights. These types of proceedings are often costly and could be very time-consuming to us, and we cannot assure you
that the deciding authorities will rule in our favor. An unfavorable decision could allow third parties to use our technology
without being required to pay us licensing fees or may compel us to license needed technologies to a third-party. Such a decision
could even result in the invalidation or a limitation in the scope of our patents or forfeiture of the rights associated with our
patents or pending patent applications. To the extent prudent, we intend to bring litigation against third parties that we believe are
infringing one or more of our patents.
In addition, we have sought and intend to continue seeking orphan drug status whenever it is available. If a product which has
an orphan drug designation subsequently receives the first regulatory approval for the indication for which it has such
designation, the product is entitled to orphan exclusivity, meaning that the applicable regulatory authority may not approve any
other applications to market the same drug for the same indication, except in certain very limited
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circumstances, for a period of seven years in the United States and ten years in Europe. Orphan drug designation does not prevent
competitors from developing or marketing different drugs for an indication.
We also rely on trade secret protection for our confidential and proprietary information. No assurance can be given that others
will not independently develop substantially equivalent proprietary information and techniques or otherwise gain access to our
trade secrets or disclose such technology, or that we can meaningfully protect our trade secrets. However, we believe that the
substantial costs and resources required to develop technological innovations will help us to protect the competitive advantage of
our products.
It is our policy to require our employees, consultants, outside scientific collaborators, sponsored researchers and other advisors
to execute confidentiality agreements upon the commencement of employment or consulting relationships with us. These
agreements provide that all confidential information developed or made known to the individual during the course of the
individual’s relationship with us is to be kept confidential and not disclosed to third parties except in specific circumstances. In
the case of employees, the agreements provide that all inventions conceived by the individual shall be our exclusive property.
There can be no assurance, however, that these agreements will provide meaningful protection or adequate remedies for our trade
secrets in the event of unauthorized use or disclosure of such information.
Manufacturing
We currently contract with third parties for the manufacture of our product candidates for commercial use, or non-clinical
studies and clinical trials and intend to do so in the future. We currently have long-term agreements with third-party contract
manufacturing organizations (“CMOs”) for the production of the active ingredient and final product for Rubraca. We do not own
or operate manufacturing facilities for the production of commercial and clinical quantities of our product candidates. We
currently have no plans to build our own clinical or commercial scale manufacturing capabilities. To meet our projected needs for
commercial manufacturing, we are working with our current third-party suppliers to ensure sufficient capacity to meet our
manufacturing requirements. Although we rely on contract manufacturers, we have personnel with extensive manufacturing
experience to oversee the relationships with our contract manufacturers.
We have developed the process for manufacturing Rubraca’s active pharmaceutical ingredient (“API”) to a degree sufficient
to meet clinical demands and projected commercial requirements. Manufacturing of Rubraca API is being performed by Lonza
Ltd (“Lonza”). Manufacturing operations for an advanced intermediate, which is the inventory prior to conversion to API, was
expanded to a second Lonza site during 2019. The Rubraca drug product formulation and manufacturing process to produce that
formulation have been developed to a degree sufficient to meet clinical demands and projected commercial requirements. A
single third-party CMO capable of both formulation development and drug product manufacturing is currently producing the
Rubraca drug product.
To date, our third-party manufacturers have met our manufacturing requirements and we expect them to meet anticipated full-
scale commercial demands.
Lonza Agreement - Rubraca
On October 3, 2016, we entered into an agreement with Lonza for the long-term manufacture and supply of the API for
rucaparib. Under this agreement, Lonza is a non-exclusive manufacturer of the Rubraca API during the 10-year term of the
agreement. Lonza constructed, in an existing Lonza facility, a production train that is exclusively dedicated to the manufacture of
the Rubraca API. The dedicated production train provides manufacturing capacity to meet our currently anticipated needs for
commercial supply of Rubraca API. We are obligated to make scheduled capital program fee payments toward capital equipment
and other costs associated with the construction of the dedicated production train. Further, once the production train became
operational in October 2018, we are obligated to pay a fixed facility fee each quarter for the duration of the Agreement, which
expires on December 31, 2025, unless extended by mutual consent of the parties.
Either party may terminate the agreement due to a material breach of the agreement by the other party, subject to prior written
notice and a cure period. We may terminate the agreement, subject to 90 days’ prior written notice, in the event Rubraca is
withdrawn from the market for certain reasons. In the event of such a termination by us, or termination by Lonza due to material
breach by us, we are obligated to compensate Lonza for any services rendered, or for which costs have been incurred by Lonza in
anticipation of services to be provided to us, and to pay to Lonza the remaining
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amount of any capital program fees and quarterly fixed facility fees for the remainder of the term of the agreement. In the event
we terminate the agreement due to material breach by Lonza, Lonza is obligated to repay all or a portion of the capital program
fees previously paid by us.
Lucitanib
The API for lucitanib is currently being produced by a CMO. To date, the current production process has been sufficient to
satisfy immediate clinical demands. We may undertake additional development work to further optimize the active
pharmaceutical ingredient manufacturing process. The finished drug product for lucitanib is currently being manufactured at a
CMO. The current product and process are sufficiently developed to meet immediate clinical demands. Additional scale-up work
and/or additional production capacity will be necessary to support larger clinical development or commercialization
requirements.
Commercial Operations
Our commercial organizations in the U.S. and Europe are in place and supporting the commercial sale of Rubraca. We believe
the oncology market for Rubraca is addressable with a targeted sales and marketing organization, with capabilities that include
the management of key accounts such as managed care organizations, group-purchasing organizations, oncology group networks
and government accounts. We sell Rubraca through a limited distribution network consisting of select number of specialty
pharmacies and distributors. Healthcare providers prescribe Rubraca to patients and the specialty pharmacies and distributors
dispense Rubraca directly to patients. We intend to continue promoting Rubraca ourselves for its current indications and any
additional indications we may obtain in the future. We retain the rights to Rubraca in the rest of the world.
In October 2020, we adopted a new U.S. commercial strategy to address a challenging sales environment resulting from a
trend toward reduced in-person access for oncology commercial teams to oncology practices in general, which has been further
accelerated by COVID-19, which has severely limited oncology patient visits and cancer diagnoses. Physicians increasingly
prefer digital communications and virtual peer-to-peer interactions which they can access when they choose. The new hybrid
strategy elevates digital programming, virtual communication and peer-to-peer interactions while reducing in-person promotion,
and the remaining in-person activities will be much more targeted. This hybrid strategy does not require as large a U.S.
commercial organization, and in early November the size of the organization was reduced by approximately 45 employees,
resulting in a U.S. commercial team of approximately 85 employees.
Customers
We are currently approved to sell Rubraca in the U.S. and Europe markets. We distribute our product principally through a
limited number of specialty distributor and specialty pharmacy providers, collectively, our customers. Our customers
subsequently sell our products to patients and health care providers. We do not believe the loss of one of these customers would
significantly impact the ability to distribute our product as we expect that sales volume would be absorbed evenly by the
remaining customers. Separately, we have arrangements with certain payors and other third parties that provide for government-
mandated and privately-negotiated rebates, chargebacks and discounts.
Employees
As of February 12, 2021, we had 429 employees, of which 291 were employed in the U.S. and 138 were employed outside of
the U.S. None of our U.S. employees are represented by labor unions, and a very small number of international employees are
covered by collective bargaining agreements.
Our success depends upon our ability to retain and attract highly qualified management and technical personnel. Talent
management is critical to our ability to execute on our long-term growth strategy. We appreciate the importance of retention,
growth and development of our employees. We continue to be committed to an inclusive culture which values equality,
opportunity and respect. In support of our inclusive culture, we believe we offer competitive compensation and benefits,
including an annual pay gap assessment; provide respectful workplace training to strengthen employee understanding; and strive
to recruit a diverse talent pool across all levels of the organization.
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Employee safety and wellbeing is of paramount importance to us in any year and was of particular focus in our fiscal year
2020 in light of COVID-19. In response to the pandemic, we provided productivity and collaboration tools and resources for
employees working remotely, including training and toolkits to help leaders effectively lead and manage remote teams. In
addition, we enhanced and promoted programs to support our employees’ physical and mental wellbeing.
About Clovis
We were incorporated under the laws of the State of Delaware in April 2009 and completed our initial public offering of our
common stock in November 2011. Our common stock is listed on the NASDAQ Global Select Market under the symbol
“CLVS.” Our principal executive offices are located at 5500 Flatiron Parkway, Suite 100, Boulder, Colorado 80301, and our
telephone number is (303) 625-5000. We maintain additional offices in San Francisco, California, Oakland, California,
Cambridge, UK, London, UK, Milan, Italy and in several other locations in Europe. Our website address is
www.clovisoncology.com. Our website and the information contained on, or that can be accessed through, the website will not be
deemed to be incorporated by reference in, and are not considered part of, this report.
Available Information
As a public company, we file reports and proxy statements with the Securities and Exchange Commission (“SEC”). These
filings include our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and proxy
statements on Schedule 14A, as well as any amendments to those reports and proxy statements, and are available free of charge
through our website as soon as reasonably practicable after we file them with, or furnish them to, the SEC. Once at
www.clovisoncology.com, go to Investors & News/SEC Filings to locate copies of such reports. The SEC also maintains a
website at www.sec.gov that contains reports, proxy statements and other information regarding us and other issuers that file
electronically with the SEC.
ITEM 1A. RISK FACTORS
Our business faces significant risks and uncertainties. Certain factors may have a material adverse effect on our business
prospects, financial condition and results of operations, and you should carefully consider them. Accordingly, in evaluating our
business, we encourage you to consider the following discussion of risk factors, in its entirety, in addition to other information
contained in or incorporated by reference into this Annual Report on Form 10-K and our other public filings with the SEC. Other
events that we do not currently anticipate or that we currently deem immaterial may also affect our business, prospects, financial
condition and results of operations.
Risk Factor Summary
Our business operations are subject to numerous risks and uncertainties, including those outside of our control, that could
cause our business, financial condition or operating results to be harmed, including risks regarding the following:
●
the impact of the COVID-19 pandemic on our revenues and our ability to continue to operate our business;
● we will require substantial additional funding which may not be available to us on acceptable terms, or at all, and failure
to obtain additional funding may impact our ability to continue our development programs and successfully
commercialize Rubraca;
●
servicing our long-term debt requires a significant amount of cash, and we may not have sufficient cash flow from our
business to pay our substantial debt, a portion of which is due this year;
● we have incurred significant losses since our inception and anticipate that we will continue to incur losses for the
foreseeable future;
● we may not be able to raise the funds necessary to repay our debt upon a fundamental change, and provisions in our debt
could delay or prevent an otherwise beneficial takeover of us;
● we are highly dependent on revenues from the sale of Rubraca, and the rate and degree of market acceptance and
commercial viability, including the safety, efficacy and potency of Rubraca and our other product candidates may limit
the commercial success of Rubraca;
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●
if our sales, marketing and distribution capabilities for Rubraca or other product candidates for which we obtain
marketing approval are inadequate, we may be unable to generate sufficient revenue from sales of our products;
● we cannot give any assurance that the Rubraca development program in other lines of therapies and indications will be
successful or that our other product candidates will receive regulatory approval;
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our expectations regarding the FDA and other regulatory authorities’ interpretation of our data and information on our
product candidates and the impact on our business of the FDA’s and other regulatory authorities’ interpretation of our
submissions, filing decisions by the FDA and other regulatory authorities, potential advisory committee meeting dates
and advisory committee recommendations, and FDA and other regulatory authorities product approval decisions and
related timelines;
the success of competing drugs that are or become available;
the success and timing of our non-clinical studies and clinical trials;
our ability to verify the clinical benefit of Rubraca through our confirmatory trials and to satisfy other post-marketing
requirements and post-marketing commitments, our ability to obtain and maintain regulatory approval of Rubraca and
our other product candidates, and the labeling under Rubraca and any other approval we may obtain;
our ability to engage and retain third-party manufacturers with sufficient capability and capacity to support the
commercialization of Rubraca and our other product candidates, and the performance of such third-party manufacturers;
our ability to obtain and maintain intellectual property protection for our product candidates, including our ability to
defend our intellectual property against challenges;
our ability to maintain our collaborations with our licensing partners to develop our product candidates;
the size and growth of potential markets for our product candidates and our ability to serve those markets;
the loss of key scientific or management personnel;
regulatory developments in the United States and foreign countries;
our operating results are difficult to predict and may fluctuate, and if our operating results are below the expectations of
investors or analysts, the trading price of our stock could decline;
the price of our stock has been, and may continue to be volatile, which will impact the value of your investment and our
ability to raise additional capital on favorable terms, or at all;
future sales and issuances of our common stock or rights to purchase our common stock, including through our equity
incentive plans, could result in dilution of your investment and cause our stock price to fall.
Risks Related to the COVID-19 Pandemic
The outbreak of COVID-19 could materially adversely affect our business.
On January 30, 2020, the World Health Organization (the “WHO”) declared that the recent novel coronavirus disease
(COVID-19) outbreak was a public health emergency of international concern, and on March 11, 2020 the WHO declared the
COVID-19 outbreak a pandemic. This has resulted in increased travel restrictions, quarantines, “work-at-home” and “shelter-in-
place” orders and extended shutdown of certain non-essential businesses in the United States, and European and Asia-Pacific
countries, including countries in which we commercialize Rubraca and countries in which we have planned or active clinical
trials. With a renewed rise in the number of cases of the coronavirus in certain parts of the United States and Europe and the
ongoing uncertainty regarding future trends in cases, these restrictions, quarantines, shutdowns and other disruption to businesses
globally continue to evolve and, in many areas, increase. The effects of the coronavirus are difficult to assess or predict.
Our ability to generate product revenue for the year and quarter ended December 31, 2020 was negatively affected by the
COVID-19 pandemic due to fewer diagnoses and fewer patients going to in-person office visits as oncology practices and
patients continue to adapt to the impact of the virus. We anticipate that the outbreak will likely have a significant impact on our
business in future quarters, and cannot currently predict the extent or duration of that impact.
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The outbreak of COVID-19 has had a major impact on the financial markets, the global economy or the economies of
particular countries or regions. Specifically, the COVID-19 outbreak could result in reduced operations of third-party
manufacturers upon whom we rely, disrupt our supply chain, or otherwise limit our ability to obtain sufficient materials to
manufacture Rubraca and our product candidates. While we believe that we have sufficient supply of Rubraca and our product
candidates to continue our commercial and clinical operations as planned, Rubraca and our product candidates, or materials
contained therein, come from facilities located in areas impacted by COVID-19 or that may be impacted, as the COVID-19
outbreak or its disruption worsens. If any third party in our supply or distribution chain for materials or finished product are
adversely impacted by restrictions resulting from the COVID-19 outbreak, including staffing shortages, production slowdowns
and disruptions in delivery systems, our supply chain may be disrupted, limiting our ability to manufacture and distribute
Rubraca for commercial sales and our product candidates for our clinical trials and research and development operations. There is
no guarantee that the recent COVID-19, or any potential future, outbreak would not impact our future supply chain, which could
have a material adverse impact on our clinical trial plans and business operations.
Our sales force has had physical access to hospitals, clinics, doctors and pharmacies curtailed and/or has been limited, which
may have a material adverse effect on our future sales. While digital tools are available to our field employees to facilitate remote
meetings with healthcare providers, we cannot ensure that these methods will be effective. Additionally, patients who might be
currently using Rubraca, or might otherwise be eligible to use our products, may be unable to meet with their healthcare
providers in-person, which may reduce the number of prescription refills or new patient starts, affecting our revenues from
Rubraca both in our currently approved ovarian cancer indications, as well as impacting our current launch in BRCA-mutant
metastatic castration-resistant prostate cancer, which was approved during the second quarter of 2020.
Furthermore, our clinical trials may be affected by the COVID-19 outbreak. Although we did not see material disruption to
our clinical trials as a result of the COVID-19 pandemic for the year ended December 31, 2020, we could see material disruption
during 2021. During the second quarter of 2020, we observed a slight decrease in the rate of enrollment in ATHENA, our largest
clinical trial, however we completed target enrollment in ATHENA in that quarter. As the outbreak persists in countries in which
we conduct or plan to conduct our clinical trials, activities such as site initiation, patient enrollment, trial data collection, and site
monitoring visits may be delayed or stalled due to travel and access restrictions, diversion of healthcare resources toward the
COVID-19 outbreak, which we have already seen in certain of our trial sites, patient or staff unwillingness to visit hospitals and
clinics and participate in our trials, or quarantines and other restrictions that may impede patient or staff movement and study
drug availability at trial sites, interrupt healthcare services or otherwise prevent patient compliance with clinical trial
protocols. Additionally, we may slow or delay enrollment in certain trials to manage expenses.
In addition, COVID-19 could affect our employees, our agents and their employees or the employees of companies with
which we do business, thereby disrupting our business operations. We have implemented work-at-home policies and may
experience limitations in employee resources. Our increased reliance on personnel working from home may negatively impact
productivity, or disrupt, delay, or otherwise adversely impact our business. The effects of working from home and other burdens
imposed by COVID-19 on individuals may impact our employee retention. In addition, our reliance on personnel working from
home could increase our cyber security risk, create data accessibility concerns, and make us more susceptible to communication
disruptions, any of which could adversely impact our business operations or delay necessary interactions with local and federal
regulators, manufacturing sites, research or clinical trial sites and other important agencies and contractors.
On March 18, 2020, the Families First Coronavirus Response Act (“FFCR Act”), and on March 27, 2020, the Coronavirus
Aid, Relief and Economic Security (“CARES”) Act were each enacted in response to the COVID-19 pandemic. The FFCR Act
and the CARES Act contain numerous income tax provisions, such as relaxing limitations on the deductibility of interest and the
use of net operating losses arising in taxable years beginning after December 31, 2017. We evaluated the impact of this
legislation and the income tax provisions did not result in a material cash benefit to us. Future regulatory guidance under the
FFCR Act and the CARES Act (as well as under the Tax Cuts and Jobs Act) remains forthcoming, and such guidance could
ultimately increase or lessen their impact on our business and financial condition. It is also highly possible that Congress will
enact additional legislation in connection with the COVID-19 pandemic, some of which could impact us.
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The trading prices for our common stock and of other biopharmaceutical companies have been highly volatile as a result of the
coronavirus pandemic. As a result, we may face difficulties raising capital or which may be on unfavorable terms. In addition, a
recession, depression or other sustained adverse market event resulting from the spread of the coronavirus could materially and
adversely affect our business and the value of our common stock. A number of governments in places where we have operations
have adopted stimulus programs to assist businesses effected by COVID-19, including by facilitating lending arrangements. We
may access these loan programs for additional working capital although there can be no guarantee that we will obtain any such
loans and we do not currently know the terms of such loan programs.
The effectiveness of external parties, including governmental and non-governmental organizations, in combating the spread
and severity of COVID-19 could have a material impact on the losses we experience. These events could cause a material adverse
effect on our results of operations in any period and, depending on their severity, could also materially and adversely affect our
financial condition.
Risks Related to Our Financial Position and Capital Requirements
We will require substantial additional funding which may not be available to us on acceptable terms, or at all. If we fail to
obtain additional financing, we may be unable to complete the development and commercialization of our products or
continue our development programs.
Our operations have consumed substantial amounts of cash since inception. We expect to continue to spend substantial
amounts to advance the clinical development of our products and launch and commercialize our products.
Based on current estimates, we believe that our existing cash, cash equivalents and available-for-sale securities will allow us
to fund our operating plan through at least the next 12 months. We do not have any material committed external source of funds
or other support for our development efforts, other than the ATHENA clinical trial financing agreement with certain affiliates of
Sixth Street Partners, LLC (“Sixth Street”) to support the funding of the ATHENA trial.
Until we can generate a sufficient amount of product revenue to finance our cash requirements, which we may never do in
sufficient amounts, we expect to finance future cash needs through a combination of public or private equity or debt offerings,
and collaborations, strategic alliances and other similar licensing arrangements. We cannot be certain that additional funding will
be available on acceptable terms, or at all. If we are unable to raise additional capital in sufficient amounts or on terms acceptable
to us, we may have to significantly delay, scale back or discontinue the development or commercialization of one or more of our
products, or our plans for acquisition or in-license of new product candidates. We may also seek collaborators for one or more of
our current or future product candidates on terms that are less favorable than might otherwise be available. Any of these events
could significantly harm our business, financial condition and prospects.
Servicing our long-term debt requires a significant amount of cash, and we may not have sufficient cash flow from our
business to pay our substantial debt.
As of December 31, 2020, we had $64.4 million outstanding aggregate principal amount of 2.5% convertible senior notes due
2021 (the “2021 Notes”), $300.0 million outstanding aggregate principal amount of 1.25% convertible senior notes due 2025 (the
“2025 Notes”), $85.8 million outstanding aggregate principal amount of 4.50% convertible senior notes due 2024 (the “2024
Notes (2019 Issuance)”), and $57.5 million outstanding aggregate principal amount of a new series of 4.50% Convertible Senior
Notes due 2024 (the “2024 Notes (2020 Issuance)” and together with the 2021 Notes, 2024 Notes and 2025 Notes, the “Notes”).
In addition, as of December 31, 2020, we had $99.8 million outstanding aggregate principal amount pursuant to our ATHENA
clinical trial financing agreement. The $64.4 million in outstanding aggregate principal amount of the 2021 Notes is due on
September 15, 2021, and we are obligated to begin repaying the ATHENA clinical trial financing on a quarterly basis, beginning
on the earliest to occur of (i) the termination of the ATHENA Trial, (ii) the approval by the FDA of an update to the label portion
of the Rubraca new drug application (“NDA”) to include in such label the treatment of an indication resulting from the ATHENA
Trial, (iii) the date on which we determine that the results of the ATHENA Trial are insufficient to achieve such an expansion of
the Rubraca label to cover an indication based on the ATHENA Trial and (iv) September 30, 2022 (the “Repayment Start Date”).
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Our ability to make scheduled payments of interest and principal on the Notes, to pay the repurchase price for the Notes on a
fundamental change or to begin repaying the ATHENA clinical trial financing when due, depends on our future performance,
which is subject to economic, financial, competitive and other factors beyond our control. We may not have sufficient cash in the
future to service our debt. If we are unable to generate such cash flow or secure additional sources of funding, we may be
required to adopt one or more alternatives, such as restructuring debt or obtaining additional equity capital on terms that may be
onerous or highly dilutive. For example, we were able to refinance a portion of the 2021 Notes from the proceeds of the issuance
of the 2024 Notes, but the terms of the 2024 Notes are not as favorable from a financial perspective as the 2021 Notes and our
stock price declined significantly upon the issuance of the 2024 Notes in part as a result of the assumed significant dilutive
impact any future conversion of these Notes would have on our common stock. Our ability to refinance our indebtedness will
depend on the capital markets and our financial condition at such time. We may not be able to engage in any of these activities or
engage in these activities on desirable terms. If we fail to meet our obligations under the Notes, we will be in default, which may
also cause a default under, and an acceleration of, our other debt obligations.
We have incurred significant losses since our inception and anticipate that we will continue to incur losses for the foreseeable
future, which makes it difficult to assess our future viability.
We are a biopharmaceutical company with a limited operating history. Biopharmaceutical product development is a highly
speculative undertaking and involves a substantial degree of risk. We have focused primarily on in-licensing and developing our
products. We are not profitable and have incurred losses in each year since our inception in April 2009. We have only a limited
operating history upon which you can evaluate our business and prospects. There are many risks and uncertainties frequently
encountered by companies in new and rapidly evolving fields, particularly in the biopharmaceutical area. Two of our earlier
product candidates, CO-101 and CO-1686, encountered development and/or regulatory setbacks after initial promising data,
leading us to discontinue enrollment in then-ongoing clinical trials. We have received regulatory approval to market Rubraca in
the U.S. and in Europe, but do not know whether Rubraca will be approved in other jurisdictions or in additional tumor types and
indications, or whether it will achieve market acceptance and be commercially successful in the long run. We have only recently
started to generate revenues from product sales, but these revenues have not been sufficient and won’t be sufficient in the near
term, to support our operations. We continue to incur significant research and development and other expenses related to our
ongoing operations. For the years ended December 31, 2020, 2019 and 2018, we had net losses of $369.2 million, $400.4 million
and $368.0 million, respectively. As of December 31, 2020, we had an accumulated deficit of $2,612.7 million. We expect to
continue to incur losses for the foreseeable future. As such, we are subject to all of the risks incident to the development of new
biopharmaceutical products and related companion diagnostics, and we may encounter unforeseen expenses, difficulties,
complications, regulatory scrutiny, delays and other unknown factors that may adversely affect our business. If any of our
product candidates fail in clinical trials or do not gain regulatory approval, or if Rubraca or any of our product candidates, if
approved, fail to achieve market acceptance, we may never become profitable. Even if we achieve profitability in the future, we
may not be able to sustain profitability in subsequent periods. Our prior losses, combined with expected future losses, have had
and will continue to have an adverse effect on our stockholders’ equity and working capital.
We may not be able to raise the funds necessary to repurchase the Notes upon a fundamental change, or the ATHENA
clinical trial financing agreement upon a change of control, and our future and current debt may contain limitations on our
ability to repurchase the Notes.
If we undergo a fundamental change, as defined in the indenture, prior to the maturity date of the Notes, holders may require
us to repurchase for cash all or any portion of the Notes at a fundamental change repurchase price equal to 100% of the principal
amount of the Notes to be repurchased plus accrued and unpaid interest to, but excluding, the fundamental change repurchase
date. In addition, in the event of a change of control of us, we must pay to the lenders under the ATHENA clinical trial financing
agreement, 1.75 times the amount we have borrowed thereunder if the change of control occurs prior to the Repayment Start
Date, or 2 times the amount we have borrowed thereunder if the change of control occurs after the Repayment Start Date (minus
the amount of all quarterly payments previously paid to the lenders) (the “Discharge Amount”). We may not have or be able to
borrow the funds required to repurchase the Notes on the fundamental change repurchase date. In addition, our ability to
repurchase the Notes may otherwise be limited by law, regulatory authority or agreements governing our future indebtedness,
including limitations on repurchase of certain debt set forth in the ATHENA clinical trial financing agreement. Our failure to
repurchase the Notes at a time when the repurchase is required by the indenture would constitute a default under the indenture. A
default under the indenture or the fundamental change itself could also lead to a default under agreements governing
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other current indebtedness, such as the ATHENA clinical trial financing agreement, or our future indebtedness. For example, an
event of default under the ATHENA clinical trial financing agreement (which includes, among other events, breaches or defaults
under or terminations of our material in-license agreements related to Rubraca and defaults under our other material
indebtedness), the lenders have the right to declare the Discharge Amount to be immediately due and payable. If the repayment of
the related indebtedness were to be accelerated after any applicable notice or grace periods, we may not have sufficient funds to
repay the indebtedness and repurchase the Notes when required.
We may incur substantially more debt or take other actions which would intensify the risks discussed above; and we may not
generate cash flow from operations in the future sufficient to satisfy our obligations under the Notes, the ATHENA clinical
trial financing agreement and any future indebtedness we may incur.
We may incur substantial additional debt in the future, subject to the restrictions contained in any debt instruments that we
enter into in the future, some of which may be secured debt, such as the ATHENA clinical trial financing agreement. We are not
restricted under the terms of the indenture governing the Notes from incurring additional debt, securing existing or future debt,
recapitalizing our debt or taking a number of other actions that are not limited by the terms of the indenture governing the Notes
that could have the effect of diminishing our ability to make payments on the Notes or the ATHENA clinical trial financing
agreement when due. Our ability to refinance the Notes or future indebtedness will depend on the capital markets and our
financial condition at such time. In addition, agreements that govern any future indebtedness that we may incur may contain
financial and other restrictive covenants that will limit our ability to engage in activities that may be in our long-term best
interests. Our failure to comply with those covenants could result in an event of default that, if not cured or waived, could result
in the acceleration of some or all of our debt.
Provisions in the indenture and the ATHENA clinical trial financing agreement could delay or prevent an otherwise
beneficial takeover of us.
Certain provisions in the Notes and the indentures governing the Notes, and in the ATHENA clinical trial financing
agreement, could make a third-party attempt to acquire us more difficult or expensive. For example, if a takeover constitutes a
fundamental change, then holders will have the right to require us to repurchase their notes for cash. In addition, if a takeover
constitutes a make-whole fundamental change, then we may be required to temporarily increase the conversion rate. In either
case, and in other cases, our obligations under the Notes, the indentures governing the Notes and the ATHENA clinical trial
financing agreement could increase the cost of acquiring us or otherwise discourage a third party from acquiring us or removing
incumbent management, including in a transaction that holders or holders of our common stock may view as favorable.
Risks Related to Our Business and Industry
We are highly dependent on the commercial success of Rubraca; Rubraca may not achieve market acceptance and may not be
commercially successful and we may not attain profitability and positive cash flow from operations.
Rubraca is commercially available in the U.S. and Europe. The degree of market acceptance and the commercial success of
Rubraca will depend on a number of factors, including:
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the effectiveness of our sales and marketing strategy and operations;
● maintaining compliance with all regulatory requirements applicable to Rubraca and our commercial activities, including
the post-marketing requirements and post-marketing commitments required by the FDA and the EMA, to verify
Rubraca’s clinical benefit or safety by completing certain confirmatory trials, pharmacology studies and additional
diagnostic development;
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the acceptance of Rubraca by patients and the medical community and the availability, perceived advantages and
relative cost, safety and efficacy of alternative and competing products and therapies;
the continued acceptable safety profile of Rubraca and the occurrence of any unexpected side effects, adverse reactions
or misuse, or any unfavorable publicity in these areas;
the ability of our third-party manufacturers to manufacture commercial supplies of Rubraca, to remain in good standing
with regulatory agencies, and to develop, validate and maintain commercially viable manufacturing processes that are,
to the extent required, compliant with cGMP regulations;
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the availability of coverage and adequate reimbursement from managed care plans, private health insurers and other
third-party payors and the willingness and ability of patients to pay for Rubraca;
the development or commercialization of competing products or therapies;
● marketing and distribution support for Rubraca, including the degree to which the approved labeling supports
promotional initiatives for commercial success;
the actual market size for Rubraca, which may be different than expected;
our ability to enforce our intellectual property rights in and to Rubraca;
our ability to avoid third party patent interference or patent infringement claims; and
our ability to obtain regulatory approvals, including for pricing and reimbursement, to commercialize Rubraca in
markets outside of the U.S. and Europe.
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As many of these factors are beyond our control, we cannot assure you that we will be able to continue to grow meaningful
revenue through the sale of Rubraca. In addition, we may experience significant fluctuations in sales of Rubraca from period to
period. We have two other product candidates, lucitanib, in clinical development and FAP-2286 in pre-clinical development. Any
inability on our part to successfully commercialize Rubraca in the United States, Europe and any other territories where it may be
approved, or any significant delay in such approvals, could have a material adverse impact on our ability to execute upon our
business strategy and, ultimately, to generate sufficient revenues from Rubraca to reach or maintain profitability or sustain our
anticipated levels of operations.
If our sales, marketing and distribution capabilities for Rubraca or our product candidates for which we obtain marketing
approval are inadequate, we may be unable to generate revenue from sales of our products.
Prior to the launch of Rubraca, we had not commercialized any drug products as a company. To achieve commercial success
for Rubraca and any product candidate that may be approved by the FDA or comparable foreign regulatory authorities, we must
continue to expand our sales, marketing, managerial and other nontechnical capabilities or make arrangements with third parties
to perform these services. We are competing with companies that currently have extensive, well-funded, and more experienced
sales and marketing operations. We may be unable to compete successfully against these more established companies.
We have built a field organization and other capabilities for the sales, marketing and distribution of Rubraca in the United
States and in Europe, and there are significant risks involved with building and managing a sales organization. Factors that may
inhibit our efforts to effectively commercialize Rubraca on our own include:
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our inability to recruit, train, retain and incentivize adequate numbers of qualified and effective sales and marketing
personnel;
the inability of sales personnel to generate sufficient sales leads and to obtain access to physicians or persuade adequate
numbers of physicians to use or prescribe Rubraca; and
our inability to effectively manage a geographically dispersed sales and marketing team.
If we are unable to maintain effective sales, marketing and distribution capabilities for Rubraca or if we are unable to fully
establish and maintain sales, marketing and distribution capabilities for Rubraca outside of the United States or for any other
product candidate for which we obtain marketing approval, whether independently or with third parties, we may not be able to
generate product revenue or may not become profitable. If the cost of establishing and maintaining a sales and marketing
organization exceeds the cost-effectiveness of doing so, we may not become profitable.
With respect to our product candidates, we may elect to collaborate with third parties that have direct sales forces and
established distribution systems, either to augment our own sales force and distribution systems or in lieu of our own sales force
and distribution systems in certain territories. To the extent that we enter into licensing or co-promotion arrangements for any of
our product candidates, our product revenue may be lower than if we directly marketed or sold our approved products. In
addition, any revenue we receive as a result of such arrangements would depend in whole or in part upon the efforts of such third
parties, which may not be successful and are generally not within our control. If we are unable to enter into such arrangements on
acceptable terms or at all, we may not be able to successfully commercialize our product candidates that receive regulatory
approval. If we are not successful in commercializing our
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product candidates, either on our own or through collaborations with one or more third parties, our future product revenue will
suffer, and we may incur significant additional losses.
We cannot give any assurance that the Rubraca development program in other lines of therapies and indications will be
successful or that our other product candidates will receive regulatory approval.
To date, we have invested a significant portion of our efforts and financial resources in the acquisition and development of our
product candidates. Our business depends entirely on the successful development and commercialization of our product
candidates.
Each of our product candidates requires clinical development, management of clinical, non-clinical and manufacturing
activities, regulatory approval in multiple jurisdictions, obtaining manufacturing supply, building of a commercial organization
and significant marketing efforts in order to generate any revenues from product sales. We are not permitted to market or promote
any of our product candidates before we receive regulatory approval from the FDA or comparable foreign regulatory authorities.
To date, we have received regulatory approval from the FDA and EMA to market Rubraca in the United States and Europe,
respectively. We may not receive regulatory approvals for Rubraca for broader indications and lines of therapy or other tumor
types and we may never receive regulatory approval for other product candidates. In addition, certain of our product development
plans may contemplate the development of companion diagnostics by third-party collaborators. Companion diagnostics are
subject to regulation as medical devices and must themselves be approved for marketing by the FDA or certain other foreign
regulatory agencies before our product candidates may be commercialized.
We cannot be certain that Rubraca will be successfully developed to expand its current label to include other indications or
that any of our product candidates will be successful in clinical trials or receive regulatory approval. Further, our product
candidates may not receive regulatory approval even if they are successful in clinical trials. Two of our product candidates, CO-
101 and rociletinib, encountered development and regulatory setbacks after initial promising data, leading us to discontinue
enrollment in ongoing clinical trials. Even if we successfully obtain regulatory approvals to market one or more of our other
product candidates, our revenues will be dependent, in part, upon our diagnostic collaborators’ ability to obtain regulatory
approval of the companion diagnostics, where required, to be used with our product candidates, as well as the size of the markets
in the territories for which we gain regulatory approval and have commercial rights. If the markets that we are targeting are not as
significant as we estimate, we may not generate significant revenues from sales of such products, if approved.
We plan to seek regulatory approval to commercialize our product candidates, and for other indications for Rubraca, in the
United States, Europe and in additional foreign countries. While the scope of regulatory approval is similar in other countries,
obtaining separate regulatory approval in many other countries requires compliance with numerous and varying regulatory
requirements of such countries regarding safety and efficacy and governing, among other things, clinical trials and commercial
sales, pricing and distribution of our product candidates, and we cannot predict success in these jurisdictions.
Clinical drug development involves a lengthy and expensive process with an uncertain outcome, and results of earlier studies
and trials may not be predictive of future trial results.
Clinical testing is expensive and can take many years to complete, and its outcome is inherently uncertain. Failure can occur at
any time during the clinical trial process. The results of non-clinical studies and early clinical trials of our product candidates may
not be predictive of the results of later-stage clinical trials. Product candidates in later stages of clinical trials may fail to show the
desired safety and efficacy traits despite having progressed through non-clinical studies and initial clinical trials. It is not
uncommon for companies in the biopharmaceutical industry to suffer significant setbacks in advanced clinical trials due to lack
of efficacy or adverse safety profiles, notwithstanding promising results in earlier trials. Indeed, based on the negative results of a
pivotal study, we ceased further development of our previous product candidate CO-101, and we decided to discontinue ongoing
development of rociletinib as a result of the issuance of a Complete Response Letter by the FDA. Additionally, our future clinical
trial results may not be successful.
Although we have clinical trials ongoing, we may experience delays in our ongoing clinical trials, and we do not know
whether planned clinical trials will begin on time, need to be redesigned, enroll patients on time or be completed on schedule, if
at all. Clinical trials can be delayed for a variety of reasons, including delays related to:
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obtaining regulatory approval to commence a trial;
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reaching agreement on acceptable terms with prospective contract research organizations (“CROs”) and clinical trial
sites, the terms of which can be subject to extensive negotiation and may vary significantly among different CROs and
trial sites;
obtaining institutional review board (“IRB”) approval at each site;
recruiting suitable patients to participate in a trial;
developing and validating companion diagnostics on a timely basis;
having patients complete a trial or return for post-treatment follow-up;
clinical sites deviating from trial protocol or dropping out of a trial;
adding new clinical trial sites; or
● manufacturing sufficient quantities of product candidate for use in clinical trials.
Patient enrollment, a significant factor in the timing of clinical trials, is affected by many factors including the size and nature
of the patient population, the proximity of patients to clinical sites, the eligibility criteria for the trial, the design of the clinical
trial, competing clinical trials and clinicians’ and patients’ perceptions as to the potential advantages of the drug being studied in
relation to other available therapies, including any new drugs that may be approved for the indications we are investigating.
Furthermore, we rely on CROs and clinical trial sites to ensure the proper and timely conduct of our clinical trials, and while we
have agreements governing their committed activities, we have limited influence over their actual performance.
We could encounter delays if a clinical trial is suspended or terminated by us, by the IRBs of the institutions in which such
trials are being conducted, by the Data Safety Monitoring Board for such trial or by the FDA or other regulatory authorities. Such
authorities may impose a suspension or termination due to a number of factors, including failure to conduct the clinical trial in
accordance with regulatory requirements or our clinical protocols, inspection of the clinical trial operations or trial site by the
FDA or other regulatory authorities resulting in the imposition of a clinical hold, unforeseen safety issues or adverse side effects,
failure to demonstrate a benefit from using a drug, changes in governmental regulations or administrative actions or lack of
adequate funding to continue the clinical trial. If we experience delays in the completion of, or termination of, any clinical trial of
our product candidates, the commercial prospects of our product candidates will be harmed, and our ability to generate product
revenue from any of these product candidates will be delayed. In addition, any delays in completing our clinical trials will
increase our costs, slow down our product candidate development and approval process and jeopardize our ability to commence
product sales and generate revenues. Any of these occurrences may harm our business, financial condition and prospects
significantly. In addition, many of the factors that cause, or lead to, a delay in the commencement or completion of clinical trials
may also ultimately lead to the denial of regulatory approval of our product candidates.
The regulatory approval processes of the FDA, EMA and comparable foreign authorities are lengthy, time consuming and
inherently unpredictable, and if we are ultimately unable to obtain regulatory approval for Rubraca in other indications and
lines of therapy or for our other product candidates, our business will be substantially harmed.
The time required to obtain approval by the FDA, EMA and comparable foreign authorities is unpredictable, but typically
takes many years following the commencement of clinical trials and depends upon numerous factors, including the substantial
discretion of the regulatory authorities. In addition, approval policies, regulations or the type and amount of clinical data
necessary to gain approval may change during the course of a product candidate’s clinical development and may vary among
jurisdictions. We have obtained regulatory approval for Rubraca in the United States and Europe, and it is possible that Rubraca
may not obtain regulatory approval for broader indications and lines of therapy or other tumor types or that any of our other
existing product candidates or any product candidates we may seek to develop in the future will ever obtain regulatory approval.
Indeed, with the issuance of a Complete Response Letter by the FDA with respect to the rociletinib NDA, we decided to
discontinue ongoing development of rociletinib.
Our product candidates could fail to receive regulatory approval or approval may be delayed for many reasons, including the
following:
●
the FDA, EMA or comparable foreign regulatory authorities may disagree with the design or implementation of our
clinical trials;
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● we may be unable to demonstrate to the satisfaction of the FDA, EMA or comparable foreign regulatory authorities that
a product candidate is safe and effective for its proposed indication;
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the results of clinical trials may not meet the level of statistical significance required by the FDA, EMA or comparable
foreign regulatory authorities for approval;
the FDA, EMA or comparable foreign regulatory authorities may disagree with our interpretation of data from non-
clinical studies or clinical trials;
the data collected from clinical trials of our product candidates may not be sufficient to support the submission of an
NDA, MAA or other submission or to obtain regulatory approval in the United States, the EU or elsewhere;
the FDA, EMA or comparable foreign regulatory authorities may fail to approve the manufacturing processes or
facilities of third-party manufacturers with which we contract for clinical and commercial supplies;
the FDA, EMA or comparable foreign regulatory authorities may fail to approve the companion diagnostics we
contemplate developing with partners; and
the approval policies or regulations of the FDA, EMA or comparable foreign regulatory authorities may significantly
change in a manner rendering our clinical data insufficient for approval.
This lengthy approval process, as well as the unpredictability of future clinical trial results, may result in our failing to obtain
regulatory approval to market our product candidates, which would significantly harm our business, results of operations and
prospects.
Even if we receive regulatory approval for our product candidates, we will be subject to ongoing obligations and continued
regulatory review, which may result in significant additional expense. Additionally, our product candidates, if and when
approved, could be subject to labeling and other restrictions and market withdrawal, and we may be subject to penalties if we
fail to comply with regulatory requirements or experience unanticipated problems with our products.
Any regulatory approvals that we receive for our product candidates may also be subject to limitations on the approved
indicated uses for which the product may be marketed or to the conditions of approval, or contain requirements for potentially
costly post-marketing testing and clinical trials and surveillance to monitor the safety and efficacy of the product candidate. In
addition, if the FDA, EMA or comparable foreign regulatory authority approves any of our product candidates, the manufacturing
processes, pricing, labeling, packaging, distribution, adverse event reporting, storage, advertising, promotion and recordkeeping
for the product will be subject to extensive and ongoing regulatory requirements. These requirements include submissions of
safety and other post-marketing information and reports, registration, as well as continued compliance with current good
manufacturing practices and good clinical practices for any clinical trials that we conduct post-approval. Later discovery of
previously unknown problems with a product, including adverse events of unanticipated severity or frequency, or with our third-
party manufacturers or manufacturing processes or failure to comply with regulatory requirements, may result in, among other
things:
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restrictions on the marketing or manufacturing of the product, withdrawal of the product from the market or voluntary or
mandatory product recalls;
fines, warning letters or holds on clinical trials;
refusal by the FDA, EMA and comparable foreign authorities to approve pending applications or supplements to
approved applications filed by us, or suspension or revocation of product license approvals;
product seizure or detention, or refusal to permit the import or export of products; and
injunctions or the imposition of civil or criminal penalties.
All of the foregoing limitations, obligations, and requirements also apply to Rubraca, for which we have received regulatory
approval in the United States and the EU for certain indications.
We may seek approval from U.S. and foreign regulatory authorities for one or more product candidates on a conditional basis
with full approval conditioned upon fulfilling the requirements of regulators. For example, we received accelerated approval from
the FDA for the initial indication for Rubraca and conditional marketing authorization from
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the EMA for the initial indication for Rubraca. Each of these approval pathways has certain conditions to approval, some of
which may be post-approval, such as the conduct of a post-approval, or confirmatory, trial using due diligence. If we are unable
to fulfill the requirements of regulators that are conditions of a product’s accelerated or conditional approval, if the confirmatory
trial shows unfavorable results or increased or additional undesirable side effects, or if regulators re-evaluate the data or risk-
benefit profile of our product candidate, the availability of accelerated or conditional approval may be withdrawn or our
conditional approval may not result in full approval or may be revoked or not renewed. Alternatively, we may be required to
change a product candidate’s labeled indications or even withdraw the product, if approved, from the market.
The FDA’s, EMA’s and comparable foreign authorities’ policies may change, and additional government regulations may be
enacted that could prevent, limit, or delay regulatory approval of our product candidates. We cannot predict the likelihood, nature
or extent of government regulation that may arise from future legislation or administrative action, either in the United States, the
EU or abroad. If we are slow or unable to adapt to changes in existing requirements or the adoption of new requirements or
policies, or if we are not able to maintain regulatory compliance, we may lose any marketing approval that we may have
obtained, and we may not achieve or sustain profitability, which would adversely affect our business. Any of the foregoing
scenarios could materially harm the commercial prospects for our product candidates.
Rubraca and our other product candidates may cause undesirable side effects or have other properties that could delay or
prevent their regulatory approval, limit the commercial profile of an approved label or result in significant negative
consequences following marketing approval, if any.
Adverse events (“AEs”) attributable to our product candidates could cause us or regulatory authorities to interrupt, delay or
halt clinical trials and could result in a more restrictive label or the delay or denial of regulatory approval by the FDA, EMA or
other comparable foreign authorities. Clinical studies conducted to date have generated AEs related to our product candidates,
some of which have been serious. Patients treated with Rubraca have commonly experienced nausea, vomiting, constipation,
dysgeusia, anemia/decreased hemoglobin, decreased appetite, diarrhea, abdominal pain, thrombocytopenia and fatigue/asthenia.
In studies of lucitanib, hypertension, proteinuria and subclinical hypothyroidism requiring supplementation are the most common
AEs observed. As is the case with all oncology drugs, it is possible that there may be other potentially harmful characteristics
associated with their use in future trials, including larger and lengthier Phase III clinical trials. As we evaluate the use of our
product candidates in combination with other active agents, we may encounter safety issues as a result of the combined safety
profiles of each agent, which could pose a substantial challenge to that development strategy.
Results of our trials could reveal a high and unacceptable severity and prevalence of these or other side effects. In such an
event, our trials could be suspended or terminated and the FDA, EMA or comparable foreign regulatory authorities could order us
to cease further development of or deny approval of our product candidates for any or all targeted indications. The drug-related
AEs could affect patient recruitment or the ability of enrolled patients to complete the trial or result in potential product liability
claims. Any of these occurrences may harm our business, financial condition and prospects significantly.
Additionally, if we or others later identify undesirable side effects caused by such products, a number of potentially significant
negative consequences could result, including:
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sales of such product may decline;
regulatory authorities may withdraw or restrict approvals of such product;
regulatory authorities may require additional warnings on the label;
● we may be required to create a medication guide outlining the risks of such side effects for distribution to patients;
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additional nonclinical or clinical studies, changes in labeling or changes to manufacturing processes, specifications
and/or facilities may be required
● we could be sued and held liable for harm caused to patients; and
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our reputation may suffer.
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Any of the above occurrences would harm or prevent sales of such product, prevent us from achieving or maintain market
acceptance of a product candidate, increase our expenses and impair our ability to successfully commercialize Rubraca. As
Rubraca is commercially available, it may be used in a wider population and in a less rigorously controlled environment than in
clinical studies. As a result, regulatory authorities, healthcare practitioners, third-party payors or patients may perceive or
conclude that the use of Rubraca is associated with previously unknown serious adverse effects, undermining our
commercialization efforts.
Failure to successfully validate, develop and obtain regulatory approval for companion diagnostics could harm our drug
development strategy.
Where appropriate in the context of our clinical development strategy, we seek to identify patient subsets within a disease
category who may derive selective and meaningful benefit from the product candidates we are developing. In collaboration with
partners, we may develop companion diagnostics to help us to more accurately identify patients within a particular subset, both
during our clinical trials and in connection with the commercialization of our product candidates. Companion diagnostics are
subject to regulation by the FDA, EMA and comparable foreign regulatory authorities as medical devices and require separate
regulatory approval prior to commercialization. We do not develop companion diagnostics internally and thus we are dependent
on the sustained cooperation and effort of our third-party collaborators in developing and obtaining approval for these companion
diagnostics. We and our collaborators may encounter difficulties in developing and obtaining approval for the companion
diagnostics, including issues relating to selectivity/specificity, analytical validation, reproducibility, or clinical validation. Any
delay or failure by our collaborators to develop or obtain regulatory approval of the companion diagnostics could delay or prevent
approval of our product candidates. In addition, our collaborators may encounter production difficulties that could constrain the
supply of the companion diagnostics, and both they and we may have difficulties gaining acceptance of the use of the companion
diagnostics in the clinical community. If such companion diagnostics fail to gain market acceptance, it would have an adverse
effect on our ability to derive revenues from sales of our products. In addition, the diagnostic company with whom we contract
may decide to discontinue selling or manufacturing the companion diagnostic that we anticipate using in connection with
development and commercialization of our product candidates or our relationship with such diagnostic company may otherwise
terminate. We may not be able to enter into arrangements with another diagnostic company to obtain access to an alternative
diagnostic test for use in connection with the development and commercialization of our product candidates or do so on
commercially reasonable terms, which could adversely affect and/or delay the development or commercialization of our product
candidates.
We rely on third parties to conduct our non-clinical studies and clinical trials. If these third parties do not successfully carry
out their contractual duties or meet expected deadlines, we may not be able to obtain regulatory approval for or commercialize
our product candidates and our business could be substantially harmed.
We have relied upon and plan to continue to rely upon third-party CROs to monitor and manage data for our ongoing non-
clinical and clinical programs. We rely on these parties for execution of our non-clinical and clinical studies, and control only
certain aspects of their activities. Nevertheless, we are responsible for ensuring that each of our studies is conducted in
accordance with the applicable protocol, legal, regulatory and scientific standards, and our reliance on the CROs does not relieve
us of our regulatory responsibilities. We and our CROs are required to comply with GCP, which are regulations and guidelines
enforced by the FDA, the EMA and comparable foreign regulatory authorities for all of our products in clinical development.
Regulatory authorities enforce these GCPs through periodic inspections of trial sponsors, principal investigators and trial sites. If
we or any of our CROs fail to comply with applicable GCPs, the clinical data generated in our clinical trials may be deemed
unreliable and the FDA, the EMA or comparable foreign regulatory authorities may require us to perform additional clinical trials
before approving our marketing applications. We cannot assure you that upon inspection by a given regulatory authority, such
regulatory authority will determine that any of our clinical trials comply with GCP regulations. In addition, our clinical trials
must be conducted with product produced under cGMP regulations. Our failure to comply with these regulations may require us
to repeat clinical trials, which would delay the regulatory approval process.
Our CROs have the right to terminate their agreements with us in the event of an uncured material breach. In addition, some of
our CROs have an ability to terminate their respective agreements with us if it can be reasonably demonstrated that the safety of
the subjects participating in our clinical trials warrants such termination, if we make a general assignment for the benefit of our
creditors or if we are liquidated.
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If any of our relationships with these third-party CROs terminate, we may not be able to enter into arrangements with
alternative CROs or to do so on commercially reasonable terms. In addition, our CROs are not our employees, and except for
remedies available to us under our agreements with such CROs, we cannot control whether or not they devote sufficient time and
resources to our on-going clinical and non-clinical programs. If CROs do not successfully carry out their contractual duties or
obligations or meet expected deadlines, if they need to be replaced or if the quality or accuracy of the clinical data they obtain is
compromised due to the failure to adhere to our clinical protocols, regulatory requirements or for other reasons, our clinical trials
may be extended, delayed or terminated and we may not be able to obtain regulatory approval for or successfully commercialize
our product candidates. As a result, our results of operations and the commercial prospects for our product candidates would be
harmed, our costs could increase and our ability to generate revenues could be delayed.
Switching or adding additional CROs involves additional cost and requires management time and focus. In addition, there is a
natural transition period when a new CRO commences work. As a result, delays occur, which can materially influence our ability
to meet our desired clinical development timelines. Though we carefully manage our relationships with our CROs, there can be
no assurance that we will not encounter similar challenges or delays in the future or that these delays or challenges will not have a
material adverse effect on our business, financial condition and prospects.
We rely completely on third parties to manufacture our clinical drug supplies and our commercial supplies of Rubraca, and
our development and commercialization of any of our product candidates could be stopped, delayed or made less profitable if
those third parties fail to maintain approval of the FDA, EMA or comparable foreign regulatory authorities, fail to provide us
with sufficient quantities of drug product or fail to do so at acceptable quality levels or prices.
We do not currently have nor do we plan to acquire the infrastructure or capability internally to manufacture our clinical drug
supplies for use in the conduct of our clinical trials, and we lack the resources and the capability to manufacture any of our
product candidates on a clinical or commercial scale. We do not control the manufacturing operations of, and are completely
dependent on our contract manufacturing partners for compliance with the cGMP regulatory requirements for manufacture of
both active drug substances and finished drug products. If our contract manufacturers cannot successfully manufacture material
that conforms to the strict regulatory requirements of the FDA, EMA or comparable foreign regulatory authorities, they will not
be able to secure and/or maintain regulatory approval for their manufacturing facilities. In addition, we have limited control over
the ability of our contract manufacturers to maintain adequate quality control, quality assurance and qualified personnel. If the
FDA or a comparable foreign regulatory authority does not approve these facilities for the manufacture of our product candidates
or if it withdraws any such approval in the future, we may need to find alternative manufacturing facilities, which would
significantly affect our ability to develop, obtain regulatory approval for or market our product candidates, if approved.
We rely on our manufacturers to purchase from third-party suppliers the materials necessary to produce our products. There
are a limited number of suppliers of raw materials that we use to manufacture our drugs, including Chinese suppliers, and there
may be a need to assess alternate suppliers to prevent a possible disruption of the manufacture of the materials necessary to
produce our products for clinical trials and for commercial sale. We do not have direct control over the process or timing of the
acquisition of these raw materials by our manufacturers. Moreover, we currently do not have any direct agreements for the
commercial production of these raw materials. Any significant delay in the supply of a product or product candidate, or the raw
material components thereof, due to the need to replace a third-party manufacturer, could considerably delay completion of our
clinical trials and potential regulatory approval of our product candidates. If our manufacturers or we are unable to purchase these
raw materials after regulatory approval has been obtained for our product candidates, the commercial launch of our product
candidates would be delayed or there would be a shortage in supply, which would impair our ability to generate revenues from
the sale of our product candidates.
We are dependent on our third-party manufacturers to conduct process development and scale-up work necessary to support
greater clinical development and commercialization requirements for our product candidates. Carrying out these activities in a
timely manner, and on commercially reasonable terms, is critical to the successful development and commercialization of our
product candidates. We expect that our third-party manufacturers are capable of providing sufficient quantities of our product
candidates to meet anticipated clinical and full-scale commercial demands, however if third parties with whom we currently work
are unable to meet our supply requirements, we will need to secure alternate suppliers. While we believe that there are other
contract manufacturers having the technical capabilities to manufacture our product candidates, we cannot be certain that
identifying and establishing relationships with such sources would not result in significant delay or material additional costs. It
may also take a significant period of time to
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establish an alternative source of supply for our products, product candidates and components and to have any such new source
approved by the FDA or any applicable foreign regulatory authorities.
We expect to continue to depend on third-party contract manufacturers for the foreseeable future. While we have long-term
agreements with Lonza for the manufacture of API for Rubraca and with the manufacturer of the finished drug product, those are
our single sources for the supply of Rubraca API and finished drug product, respectively, and we have not entered into
agreements with any alternate suppliers. We currently obtain our supplies of finished drug product through individual purchase
orders as described in the current supply agreement.
We are subject to risks associated with the availability of key raw materials, such as the radioisotopes used in the manufacture
of our product candidates.
The manufacture of our product candidate 177Lu-FAP-2286 and companion imaging agent 68Ga-FAP-2286 will require the
use of raw materials that are subject, at times, to global supply constraints that have the potential to delay our work on the
products incorporating those raw materials. For example, any limitation on our ability to source adequate supply of lutetium-177
for 177Lu-FAP-2286 could prevent us from gathering sufficient data in clinical trials, or to the extent that we obtain regulatory
approval for marketing for this product candidate, a limited supply may prevent us from meeting commercial demands. Supply
constraints for lutetium-177 could also materially increase the manufacturing costs of 177Lu-FAP-2286, which would increase the
cost of our clinical trials and reduce the commercial potential of the product candidate.
In addition, we plan to use gallium-68 in our development of imaging agent 68Ga-FAP-2286. Increased future demand for
gallium-68 may exceed current production capacities. If we are not able to obtain sufficient quantities of gallium-68 for use in
68Ga-FAP-2286, we may not be able to gather sufficient data on 68Ga-FAP-2286 to use in clinical trials or to possibly seek the
approval of 68Ga-FAP-2286. In addition, to the extent the approval of our product candidates depends on the screening and
monitoring of the patient population with a companion imaging agent such as 68Ga-FAP-2286 in our clinical trials, we would
experience a corresponding delay in approval and commercialization of these product candidates if we are not able to obtain
sufficient gallium-68.
Our commercial success depends upon attaining significant market acceptance of our product candidates, if approved, among
physicians, patients, healthcare payors and major operators of cancer clinics.
Even if we obtain regulatory approval for our other product candidates, the product may not gain market acceptance among
physicians, health care payors, patients and the medical community, which are critical to commercial success. Market acceptance
of any product candidate for which we receive approval depends on a number of factors, including:
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●
●
●
the efficacy and safety as demonstrated in clinical trials;
the timing of market introduction of such product candidate as well as competitive products;
the clinical indications for which the drug is approved, and the product label approved by regulatory authorities,
including any warnings that may be required on the label;
the approval, availability, market acceptance and reimbursement for the companion diagnostic;
acceptance by physicians, major operators of cancer clinics and patients of the drug as a safe and effective treatment;
the potential and perceived advantages of such product candidate over alternative treatments, especially with respect to
patient subsets that we are targeting with such product candidate;
the safety of such product candidate seen in a broader patient group, including its use outside the approved indications;
the cost, safety and efficacy of the product in relation to alternative treatments;
the availability of adequate reimbursement and pricing by third-party payors and government authorities;
relative convenience and ease of administration;
the prevalence and severity of adverse side effects; and
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●
the effectiveness of our sales and marketing efforts.
If our product candidates are approved but fail to achieve an adequate level of acceptance by physicians, healthcare payors and
patients, we will not be able to generate significant revenues, and we may not become or remain profitable.
We face significant competition from other biotechnology and pharmaceutical companies, and our operating results will
suffer if we fail to compete effectively.
The biotechnology and pharmaceutical industries are intensely competitive and subject to rapid and significant technological
change. In addition, the competition in the oncology market is intense. We have competitors both in the United States and
internationally, including major multinational pharmaceutical companies, biotechnology companies and universities and other
research institutions (see Part I, Item 1-Business, Competition section).
Many of our competitors have substantially greater financial, technical and other resources, such as larger research and
development staff and experienced marketing and manufacturing organizations. GlaxoSmithKline plc gained rights to Zejula
through its acquisition of Tesaro Inc., which was completed in January 2019. Additional mergers and acquisitions in the
biotechnology and pharmaceutical industries may result in even more resources being concentrated in our competitors. As a
result, these companies may obtain regulatory approval more rapidly than we are able and may be more effective in selling and
marketing their products as well. Smaller or early-stage companies may also prove to be significant competitors, particularly
through collaborative arrangements with large, established companies. Competition may increase further as a result of advances
in the commercial applicability of technologies and greater availability of capital for investment in these industries. Our
competitors may succeed in developing, acquiring or licensing, on an exclusive basis, drug products that are more effective or
less costly than any drug candidate that we are currently developing or that we may develop. If approved, our product candidates
will face competition from commercially available drugs, as well as drugs that are in the development pipelines of our
competitors and later enter the market.
Established pharmaceutical companies may invest heavily to accelerate discovery and development of novel compounds or to
in-license novel compounds that could make our product candidates less competitive. In addition, any new product that competes
with an approved product must demonstrate compelling advantages in efficacy, convenience, tolerability and safety in order to
overcome price competition and to be commercially successful. Accordingly, our competitors may succeed in obtaining patent
protection, receiving FDA, European Commission or other regulatory approval or discovering, developing and commercializing
medicines before we do, which would have a material adverse effect on our business.
Reimbursement may be limited or unavailable in certain market segments for our product candidates, which could make it
difficult for us to sell our products profitably.
There is significant uncertainty related to the third-party coverage and reimbursement of newly approved drugs. We have
received marketing authorization for Rubraca in the United States and the EU for multiple indications. We intend to seek
additional approvals to market Rubraca and other product candidates in the United States, Europe and other selected foreign
jurisdictions. Market acceptance and sales of our products in both domestic and international markets will depend significantly on
the availability of adequate coverage and reimbursement from third-party payors for any of our products and may be affected by
existing and future healthcare reform measures. Government and other third-party payors are increasingly attempting to contain
healthcare costs by limiting both coverage and the level of reimbursement for new drugs and, as a result, they may not cover or
provide adequate payment for our products. These payors may conclude that our products are less safe, less effective or less cost-
effective than existing or later introduced products, and third-party payors may not approve our products for coverage and
reimbursement or may cease providing coverage and reimbursement for these products.
Obtaining coverage and reimbursement approval for a product from a government or other third-party payor is a time
consuming and costly process that could require us to provide to the payor supporting scientific, clinical and cost-effectiveness
data for the use of our products. We may not be able to provide data sufficient to gain acceptance with respect to coverage and
reimbursement. We cannot be sure that coverage or adequate reimbursement will be available for any of our products. Even if we
obtain coverage for our products, third-party payors may not establish adequate reimbursement amounts, which may reduce the
demand for, or the price of, our products. If reimbursement of our future products is unavailable or limited in scope or amount, or
if pricing is set at unsatisfactory levels, we may be unable to achieve or sustain profitability.
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In both the United States and certain foreign jurisdictions, there have been, and we expect there will continue to be a number
of legislative and regulatory changes to the health care system that could affect our ability to sell our products profitably. The
U.S. government and other governments have shown significant interest in pursuing healthcare reform. In particular, the
Medicare Modernization Act of 2003 revised the payment methodology for many products under the Medicare program in the
United States. This has resulted in lower rates of reimbursement. In 2010, the Patient Protection and Affordable Care Act, as
amended by the Health Care and Education Reconciliation Act (collectively, the “Affordable Care Act”), was enacted. The
Affordable Care Act substantially changed the way healthcare is financed by both governmental and private insurers. Such
government-adopted reform measures may adversely affect the pricing of healthcare products and services in the United States or
internationally and the amount of reimbursement available from governmental agencies or other third-party payors.
Moreover, payment methodologies, including payment for companion diagnostics, may be subject to changes in healthcare
legislation and regulatory initiatives. For example, the CMS has begun bundling the Medicare payments for certain laboratory
tests ordered while a patient received services in a hospital outpatient setting and, in 2018, the CMS began paying for clinical
laboratory services based on a weighted average of reported prices that private payors, Medicare Advantage plans, and Medicaid
Managed Care plans pay for laboratory services.
There have been, and likely will continue to be, legislative and regulatory proposals at the federal and state levels directed at
broadening the availability of healthcare and containing or lowering the cost of healthcare. Recently there has also been
heightened governmental scrutiny over the manner in which manufacturers set prices for their marketed products, which has
resulted in several Congressional inquiries and proposed bills designed to, among other things, reform government program
reimbursement methodologies. Individual states in the United States have also become increasingly active in implementing
regulations designed to control pharmaceutical product pricing, including price or patient reimbursement constraints, discounts,
restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases, designed to
encourage importation from other countries and bulk purchasing. We cannot predict the initiatives that may be adopted in the
future. The continuing efforts of the government, insurance companies, managed care organizations and other payors of
healthcare services to contain or reduce costs of healthcare may adversely affect the demand for any drug products for which we
may obtain regulatory approval, as well as our ability to set satisfactory prices for our products, to generate revenues, and to
achieve and maintain profitability.
In some foreign countries, particularly in Europe, the pricing of prescription pharmaceuticals is subject to governmental
control. In these countries, pricing negotiations with governmental authorities can take considerable time after the receipt of
marketing approval for a product. To obtain reimbursement or pricing approval in some countries, we may be required to conduct
additional clinical trials that compare the cost-effectiveness of our product candidates to other available therapies. If
reimbursement of our product candidates is unavailable or limited in scope or amount in a particular country, or if pricing is set at
unsatisfactory levels, we may be unable to achieve or sustain profitability of our products in such country.
If we are not successful in attracting and retaining highly qualified personnel, we may not be able to successfully implement
our business strategy. Further, we will need to grow our organization, and we may experience difficulties in managing this
growth, which could disrupt our operations.
Our industry has experienced a high rate of turnover of management personnel in recent years. Our ability to compete in the
highly competitive biotechnology and pharmaceuticals industries depends upon our ability to attract and retain highly qualified
managerial, scientific and medical personnel. We are highly dependent on our management, scientific and medical personnel,
especially Patrick J. Mahaffy, our President and Chief Executive Officer, Dr. Lindsey Rolfe, our Executive Vice President of
Clinical Development and Pharmacovigilance and Chief Medical Officer, Gillian C. Ivers-Read, our Executive Vice President,
Technical Operations and Chief Regulatory Officer and Dr. Thomas Harding, our Chief Scientific Officer, Translational
Medicine whose services are critical to the successful implementation of our product candidate acquisition, development and
regulatory strategies.
Despite our efforts to retain valuable employees, members of our management, scientific, development and commercial teams
may terminate their employment with us on short notice. Pursuant to their employment arrangements, each of our executive
officers may voluntarily terminate their employment at any time by providing as little as thirty days advance notice. Our
employment arrangements with all of our employees provide for at-will employment, which means that any of our employees
could leave our employment at any time, with or, other than our executive officers,
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without notice. The loss of the services of any of our executive officers or other key employees and our inability to find suitable
replacements could potentially harm our business, financial condition and prospects. Our success also depends on our ability to
continue to attract, retain and motivate highly skilled junior, mid-level and senior managers as well as junior, mid-level and
senior scientific and medical personnel.
As of February 12, 2021, we employed 429 employees. As our development plans and strategies develop, we expect to expand
our employee base for managerial, operational, financial and other resources. Future growth will impose significant added
responsibilities on members of management, including the need to identify, recruit, maintain, motivate and integrate additional
employees. Also, our management may need to divert a disproportionate amount of its attention away from our day-to-day
activities and devote a substantial amount of time to managing these growth activities. We may not be able to effectively manage
the expansion of our operations which may result in weaknesses in our infrastructure, give rise to operational mistakes, loss of
business opportunities, loss of employees and reduced productivity among remaining employees. Our expected growth could
require significant capital expenditures and may divert financial resources from other projects. If our management is unable to
effectively manage our expected growth, our expenses may increase more than expected, our ability to generate revenues could
be reduced and we may not be able to implement our business strategy.
We may not be able to attract or retain qualified management and scientific personnel in the future due to the intense
competition for a limited number of qualified personnel among biopharmaceutical, biotechnology, pharmaceutical and other
businesses. Many of the other pharmaceutical companies that we compete against for qualified personnel have greater financial
and other resources, different risk profiles and a longer history in the industry than we do. They also may provide more diverse
opportunities and better chances for career advancement. Some of these characteristics may be more appealing to high quality
candidates than what we have to offer. In order to induce valuable employees to continue their employment with us, we have
provided stock options that vest over time. The value to employees of stock options that vest over time is significantly affected by
movements in our stock price that are beyond our control and may at any time be insufficient to counteract more lucrative offers
from other companies. If we are unable to continue to attract and retain high quality personnel, the rate and success at which we
can develop and commercialize product candidates will be limited.
Our employees and independent contractors, including principal investigators, CROs, consultants and vendors, may engage in
misconduct or other improper activities, including noncompliance with regulatory standards and requirements, which could
have a material adverse effect on our business.
We are exposed to the risk that our employees and independent contractors, including principal investigators, CROs,
consultants and vendors, may engage in misconduct or other illegal activity. Misconduct by those parties could include
intentional, reckless and/or negligent failures to comply with the laws and regulations of the FDA and other similar regulatory
agencies, provide accurate information to such authorities, comply with manufacturing standards we have established, including
cGMP requirements, comply with federal and state data privacy, securities, fraud and abuse and other healthcare laws and
regulations in the United States and abroad, report financial information or data accurately, or disclose unauthorized activities to
us. In particular, sales, marketing and business arrangements in the healthcare industry are subject to extensive laws and
regulations intended to prevent fraud, kickbacks, self-dealing and other abusive practices. These laws and regulations may restrict
or prohibit a wide range of pricing, discounting, marketing and promotion, sales commission, customer incentive programs and
other business arrangements. Employee or contractor misconduct could also involve the improper use of information obtained in
the course of clinical trials, which could result in regulatory sanctions and serious harm to our reputation. We have adopted a
Code of Business Ethics and other compliance policies, but it is not always possible to identify and deter misconduct by
employees and contractors, and the precautions we take to detect and prevent this activity may not be effective in controlling
unknown or unmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits
stemming from a failure to be in compliance with such laws or regulations. If any such actions are instituted against us, and we
are not successful in defending ourselves or asserting our rights, those actions could have a significant effect on our business and
results of operations, including the imposition of significant fines or other sanctions.
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Our relationships with healthcare professionals, investigators, consultants, customers (actual and potential) and third-party
payors are and will continue to be subject, directly or indirectly, to federal and state healthcare fraud and abuse laws, false
claims laws, transparency and disclosure (or “sunshine”) laws, government price reporting, and health information privacy
and security laws. If we are unable to comply, or have not fully complied, with such laws, we could face substantial penalties.
Our operations may be directly, or indirectly through our customers, subject to various federal and state fraud and abuse laws,
including, without limitation, the federal Anti-Kickback Statute and the federal False Claims Act. These laws may affect, among
other things, our current activities with clinical study investigators and research subjects, as well as proposed and future sales,
marketing, disease awareness, and patient assistance programs. In addition, we may be subject to patient privacy regulation by
both the federal government and the states in which we conduct our business. The laws that may affect our ability to operate
include, but are not limited to:
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the federal Anti-Kickback Statute, which prohibits, among other things, persons from knowingly and willfully soliciting,
receiving, offering or paying remuneration, including any kickback, bribe, or certain rebate, directly or indirectly, to
induce, or in return for, either the referral of an individual, or the purchase, lease, order or recommendation of any good,
facility, item or service for which payment will be made, in whole or in part, under a federal healthcare program, such as
the Medicare and Medicaid programs. A person or entity does not need to have actual knowledge of the federal Anti-
Kickback Statute or special intent to violate the law in order to have committed a violation; in addition, the government
may assert that a claim including items or services resulting from a violation of the federal Anti-Kickback Statute
constitutes a false or fraudulent claim for purposes of the federal False Claims Act;
federal false claims laws, including the False Claims Act, which impose criminal and civil penalties, including through
civil “qui tam” or “whistleblower” actions, against individuals or entities from knowingly presenting, or causing to be
presented, claims for payment or approval from federal programs, such as Medicare and Medicaid, that are false or
fraudulent, or knowingly making a false statement to improperly avoid, decrease or conceal an obligation to pay money
to the federal government;
the Health Insurance Portability and Accountability Act of 1996, or HIPAA which imposes criminal and civil liability
for, among other things, willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit
program and making false statements relating to healthcare matters. Similar to the federal Anti-Kickback Statute, a
person or entity does not need to have actual knowledge of the statute or specific intent to violate it in order to have
committed a violation;
● HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act and its implementing
regulations, which also imposes certain requirements on certain covered healthcare providers, health plans, and
healthcare clearinghouses, as well as their respective business associates that perform services for them that involve the
use, or disclosure of, individually identifiable health information, with respect to safeguarding the privacy, security and
transmission of individually identifiable health information;
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the federal civil monetary penalties statute, which prohibits, among other things, the offering or giving of remuneration
to a Medicare or Medicaid beneficiary that the person knows or should know is likely to influence the beneficiary’s
election of a particular supplier of items or services reimbursable by a Federal or state governmental program;
the federal Physician Payment Sunshine Act, which requires certain manufacturers of drugs, devices, biologics and
medical supplies for which payment is available under Medicare, Medicaid or the Children’s Health Insurance Program
(with certain exceptions) to report annually to the Centers for Medicare and Medicaid Services, or CMS, information
related to payments or other transfers of value made to physicians (defined to include doctors, dentists, optometrists,
podiatrists and chiropractors) and teaching hospitals, as well as ownership and investment interests held by the
physicians described above and their immediate family members;
federal consumer protection and unfair competition laws, which broadly regulate marketplace activities and activities
that potentially harm consumers;
federal government price reporting laws, which require drug manufacturers to calculate and report complex pricing
metrics to government agencies, including CMS, where such reported prices may be used in the calculation of
reimbursement and/or discounts on marketed products. Participation in these programs and compliance with the
applicable requirements may result in potentially significant discounts on products subject
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to reimbursement under federal healthcare programs and increased infrastructure costs, and may potentially limit a drug
manufacturer’s ability to offer certain marketplace discounts; and
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analogous state laws and regulations, such as state anti-kickback, false claims, consumer protection and unfair
competition laws which may apply to pharmaceutical business practices, including but not limited to, research,
distribution, sales and marketing arrangements as well as submitting claims involving healthcare items or services
reimbursed by any third-party payer, including commercial insurers; state laws that require pharmaceutical companies to
comply with the pharmaceutical industry’s voluntary compliance guidelines and the relevant compliance guidance
promulgated by the federal government that otherwise restricts payments that may be made to healthcare providers and
other potential referral sources; state laws that require drug manufacturers to file reports with states regarding pricing
and marketing information, such as the tracking and reporting of gifts, compensations and other remuneration and items
of value provided to healthcare professionals and entities; and state laws governing the privacy and security of health
information in certain circumstances, many of which differ from each other in significant ways and may not have the
same effect, thus complicating compliance efforts.
In addition, the research and development of our product candidates outside the United States, and any sales of our products or
product candidates once commercialized outside the United States will also likely subject us to foreign equivalents of the
healthcare laws mentioned above, among other foreign laws.
Efforts to ensure that our business arrangements will comply with applicable healthcare laws may involve substantial costs,
including investments in infrastructure and additional resources. Because of the breadth of these laws and the narrowness of the
statutory exceptions and safe harbors available, it is possible that some of our business activities, including our consulting
agreements and other relationships with physicians, could be subject to challenge under one or more of such laws. Governmental
and enforcement authorities may conclude that our business practices do not comply with current or future statutes, regulations or
case law interpreting applicable fraud and abuse or other healthcare laws and regulations. If our operations are found to be in
violation of any of the laws described above or any other governmental regulations that apply to us, we may be subject to,
without limitation, civil, criminal, and administrative penalties, damages, monetary fines, disgorgement, possible exclusion from
participation in Medicare, Medicaid and other federal healthcare programs, contractual damages, reputational harm, diminished
profits and future earnings and curtailment or restructuring of our operations, any of which could adversely affect our ability to
operate our business and our results of operations.
Compliance with data privacy laws and regulations is complex and could expose us to a variety of risks.
We operate in an environment that relies on the collection, processing, analysis and interpretation of large sets of individuals’
personal information, and that also, in many situations, requires that data to be transferred across borders of numerous countries
in which there are different, and potentially conflicting, data privacy laws in effect. For example, the EU General Data Protection
Regulation (“GDPR”), which took effect in May 2018, and the California Consumer Privacy Act, which took effect in January
2020, impose stringent requirements on how we and third parties with whom we contract collect, share, export or otherwise
process personal information, and provide for significant penalties for noncompliance. Breaches of our systems or those of our
third-party contractors, or other failures to protect the data we collect from misuse or breach by third parties, could expose such
personal information to unauthorized persons.
Any event involving the substantial loss of personal information or other privacy violations could give rise to significant
liability, reputational harm, damaged relationships with business partners, and potentially substantial monetary penalties under
laws enacted or being enacted around the world. Such events could also lead to restrictions on our ability to use personal
information and/or transfer personal information across country borders.
Our business activities may be subject to the Foreign Corrupt Practices Act (“FCPA”) and similar anti-bribery and anti-
corruption laws.
We are subject to a number of anti-corruption laws, including the U.S. FCPA and the U.K. Bribery Act. Our failure to comply
with anti-corruption laws applicable to us could result in penalties, which could harm our reputation and harm our business,
financial condition, results of operations, cash flows or prospects. The FCPA generally prohibits companies and their
intermediaries from making improper payments to foreign officials for the purpose of obtaining or keeping business and/or other
benefits. The FCPA also requires public companies to maintain accurate books and records and devise a system of sufficient
internal accounting controls. We regularly review and update our policies and
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procedures and internal controls designed to provide reasonable assurance that we, our employees, distributors and other
intermediaries comply with the anti-corruption laws to which we are subject. However, there are inherent limitations to the
effectiveness of any policies, procedures and internal controls, including the possibility of human error and the circumvention or
overriding of the policies, procedures and internal controls. There can be no assurance that such policies or procedures or internal
controls will work effectively at all times or protect us against liability under these or other laws for actions taken by our
employees, distributors and other intermediaries with respect to our business.
The SEC and the Department of Justice continue to view FCPA enforcement activities as a high priority. There is no certainty
that all of our employees, agents, contractors or collaborators, or those of our affiliates, will comply with all applicable laws and
regulations, particularly given the high level of complexity of these laws. Violations of these laws and regulations could result in
fines, criminal sanctions against us, our officers or our employees, requirements to obtain export licenses, cessation of business
activities in sanctioned countries, implementation of compliance programs and prohibitions on the conduct of our business. Any
such violations could materially damage our reputation, our brand, our international operations, our ability to attract and retain
employees, and our business, prospects, operating results, and financial condition.
If product liability lawsuits are brought against us, we may incur substantial liabilities and may be required to limit
commercialization of our product candidates.
We face an inherent risk of product liability. For example, we may be sued if any product we develop allegedly causes injury
or is found to be otherwise unsuitable during product testing, manufacturing, marketing or sale. Any such product liability claims
may include allegations of defects in manufacturing, defects in design, a failure to warn of dangers inherent in the product,
negligence, strict liability and a breach of warranties. Claims could also be asserted under state consumer protection acts. If we
cannot successfully defend ourselves against product liability claims, we may incur substantial liabilities or be required to limit
commercialization of our product candidates, if approved. Even successful defense would require significant financial and
management resources. Regardless of the merits or eventual outcome, liability claims may result in:
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decreased demand for our product candidates or products that we may develop;
injury to our reputation;
● withdrawal of clinical trial participants;
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initiation of investigations by regulators;
costs to defend the related litigation;
a diversion of management’s time and our resources;
substantial monetary awards to trial participants or patients;
increase in insurance premiums;
product recalls, withdrawals or labeling, marketing or promotional restrictions;
loss of revenues from product sales;
the inability to commercialize our product candidates; and
a decline in our stock price.
Our inability to obtain and retain sufficient product liability insurance at an acceptable cost to protect against potential product
liability claims could prevent or inhibit the commercialization of products we develop. We have a program of product liability
insurance covering our ongoing clinical trials; however, the amount of insurance we maintain may not be adequate to cover all
liabilities that we may incur. Although we maintain such insurance, any claim that may be brought against us could result in a
court judgment or settlement in an amount that is not covered, in whole or in part, by our insurance or that is in excess of the
limits of our insurance coverage. Our insurance policies also have various exclusions, and we may be subject to a product
liability claim for which we have no coverage. We will have to pay any amounts awarded by a court or negotiated in a settlement
that exceed our coverage limitations or that are not covered by our insurance, and we may not have, or be able to obtain,
sufficient capital to pay such amounts.
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Our internal computer systems, or those used by our CROs or other contractors or consultants, may fail or suffer security
breaches.
We and our business partners maintain sensitive company data on our computer networks, including our intellectual property
and proprietary business information, as well as certain clinical trial information. Cybersecurity attacks are becoming more
commonplace and include, but are not limited to, malicious software, attempts to gain unauthorized access to data and other
electronic security breaches that could lead to disruptions in systems, misappropriation of information and corruption of data.
Despite the implementation of security measures, our internal computer systems and those of our CROs and other contractors and
consultants are vulnerable to damage from computer viruses, unauthorized access, natural disasters, terrorism, war and
telecommunication and electrical failures. In addition, in response to the COVID-19 pandemic, a majority of our workforce is
currently working remotely. This could increase our cybersecurity risk, create data accessibility concerns and make us more
susceptible to communication disruptions. While we have not experienced any such material system failure, accident or security
breach to date, if such an event were to occur and cause interruptions in our operations, it could result in a material disruption of
our development programs and business operations. For example, the loss of, or inability to access, even temporarily, clinical trial
data from completed or ongoing or planned clinical trials could result in delays in our regulatory approval efforts and
significantly increase our costs to recover or reproduce the data. Likewise, we rely on third parties for the manufacture of our
products and product candidates, including clinical trial supply, and similar events relating to their computer systems could also
have a material adverse effect on our business and development programs. To the extent that any disruption or security breach
were to result in a loss of or damage to our data or applications, or inappropriate disclosure of confidential or proprietary
information, we could incur liability and the further development of our product candidates could be delayed.
Our business is subject to complex and evolving U.S. and foreign laws and regulations, information security policies and
contractual obligations relating to privacy and data protection, including the use, processing, and cross-border transfer of personal
information. These laws and regulations are subject to change and uncertain interpretation, and could result in claims, changes to
our business practices, or monetary penalties, and otherwise may harm our business. We receive, generate and store significant
and increasing volumes of sensitive information and business-critical information, including employee and personal data,
research and development information, commercial information, and business and financial information. Cyber-attacks, breaches,
interruptions or other data security incidents could result in legal claims or proceedings, liability under federal or state laws that
protect the privacy of personal information, regulatory penalties, significant remediation costs, disrupt key business operations
and divert attention of management and key information technology resources. In the United States and Europe, notice of
breaches of personal information must be made to affected individuals, and for extensive breaches, notice may need to be made
to the media or U.S. state attorneys general or other governmental authorities. Such a notice could harm our reputation and ability
to compete.
The United Kingdom’s departure from the EU could be costly and difficult to comply with and could harm our business.
The United Kingdom (“UK”) formally left the EU on January 31, 2020. We have based in the UK a significant portion of our
non-U.S. clinical, regulatory affairs, and pharmacovigilance operations, as well as our European commercial organization. In
anticipation of Brexit, we have taken steps to relocate certain activities from the UK in order to remain in compliance, post-
Brexit, with certain laws and regulations in the EU. While the regulatory environment in the UK is currently consistent with that
of the EU, Brexit could lead to legal uncertainty and potentially divergent national laws and regulations as the UK determines
which EU laws to replace or replicate. As such, we could be required to comply with regulatory requirements in the UK that are
in addition to, or inconsistent with, the regulatory requirements of the EU, resulting in the duplication of certain costs and new
challenges to operate in Europe. The full effect of Brexit is uncertain, and consequently, we cannot at this time fully predict what
the outcome may have on our business, particularly if our European operations or presence become a more significant part of our
business.
Fluctuations in the value of the Euro or UK pound sterling could negatively impact our results of operations and increase our
costs.
We generate revenues from sales of Rubraca in the UK and the EU. We also conduct research and development activities in
the UK and other European countries and some of the payments for these activities are denominated in Euros and UK pounds
sterling. As a result, we are exposed to foreign exchange risk, and our results of operations may be impacted by fluctuations in
the exchange rate between the U.S. dollar and the Euro or UK pound sterling, such as the decline in value of the UK pound
sterling following the results of the UK’s referendum on withdrawal from the EU. We
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currently have not entered into any foreign currency hedging contracts to reduce the effect of changes in foreign currency
exchange rates, and foreign currency hedging is inherently risky and may result in unanticipated losses.
Our business involves the use of hazardous materials and we and our third-party manufacturers and suppliers must comply
with environmental laws and regulations, which can be expensive and restrict how we do business.
Our research and development activities and our third-party manufacturers’ and suppliers’ activities involve the controlled
storage, use and disposal of hazardous materials owned by us, including the components of our product candidates and other
hazardous compounds, and which is expected to include radioactive material contained in FAP-2286. We and our manufacturers
and suppliers are subject to laws and regulations governing the use, manufacture, storage, handling and disposal of these
hazardous materials. In some cases, these hazardous materials and various wastes resulting from their use are stored at our and
our manufacturers’ facilities, pending use and disposal. We cannot completely eliminate the risk of contamination, which could
cause an interruption of our research and development efforts and business operations, injury to our employees and others,
environmental damage resulting in costly clean-up and liabilities under applicable laws and regulations governing the use,
storage, handling and disposal of these materials and specified waste products. Although we believe that the safety procedures
utilized by our third-party manufacturers for handling and disposing of these materials generally comply with the standards
prescribed by these laws and regulations, we cannot guarantee that this is the case or eliminate the risk of accidental
contamination or injury from these materials. In such an event, we may be held liable for any resulting damages and such liability
could exceed our resources. We do not currently carry biological or hazardous waste insurance coverage.
Environmental, social and governance matters may impact our business and reputation.
Increasingly, in addition to the importance of their financial performance, companies are being judged by their performance
on a variety of environmental, social and governance (“ESG”) matters, which are considered to contribute to the long-term
sustainability of companies’ performance.
A variety of organizations measure the performance of companies on such ESG topics, and the results of these assessments are
widely publicized. In addition, investment in funds that specialize in companies that perform well in such assessments are
increasingly popular, and major institutional investors have publicly emphasized the importance of such ESG measures to their
investment decisions. Topics taken into account in such assessments include, among others, the company’s efforts and impacts on
climate change and human rights, ethics and compliance with law, and the role of the company’s board of directors in supervising
various sustainability issues. In addition to the topics typically considered in such assessments, in our healthcare industry, issues
of the public’s ability to access our medicines are of particular importance.
In light of investors’ increased focus on ESG matters, there can be no certainty that we will manage such issues successfully,
or that we will successfully meet society’s expectations as to our proper role. Any failure or perceived failure by us in this regard
could have a material adverse effect on our reputation and on our business, share price, financial condition, or results of
operations, including the sustainability of our business over time.
Climate change, extreme weather events, earthquakes and other natural disasters could adversely affect our business.
In recent years, extreme weather events and changing weather patterns such as storms, flooding, droughts, fires and
temperature changes have become more common. As a result, we are potentially exposed to varying natural disaster or extreme
weather risks such as hurricanes, tornadoes, fires, droughts or floods, or other events that may result from the impact of climate
change on the environment, such as sea level rise. For example, in the event of a major earthquake, we could experience business
interruptions, destruction of facilities, and loss of life, all of which could have a material adverse effect on our business, financial
condition, or results of operations.
The potential impacts of climate change may also include increased operating costs associated with additional regulatory
requirements and investments in reducing energy, water use and greenhouse gas emissions.
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Risks Related to Our Intellectual Property
If our efforts to protect the proprietary nature of the intellectual property related to our technologies are not adequate, we may
not be able to compete effectively in our market.
We rely upon a combination of patents, trade secret protection and confidentiality agreements to protect the intellectual
property related to our technologies. Any disclosure to or misappropriation by third parties of our confidential proprietary
information could enable competitors to quickly duplicate or surpass our technological achievements, thus eroding our
competitive position in our market.
The strength of patents in the biotechnology and pharmaceutical field involves complex legal and scientific questions and can
be uncertain. The patent applications that we own or license may fail to result in issued patents in the United States or in other
foreign countries. Even if the patents do successfully issue, third parties may challenge the validity, enforceability or scope
thereof, which may result in such patents being narrowed, invalidated or held unenforceable. Furthermore, even if they are
unchallenged, our patents and patent applications may not adequately protect our intellectual property or prevent others from
designing around our claims. If the breadth or strength of protection provided by the patent applications we hold or pursue with
respect to our product candidates is threatened, it could threaten our ability to commercialize our product candidates. Further, if
we encounter delays in our clinical trials, the period of time during which we could market our product candidates under patent
protection would be reduced. Since patent applications in the United States and most other countries are confidential for a period
of time after filing, we cannot be certain that we were the first to file any patent application related to our product candidates.
Furthermore, an interference proceeding can be provoked by a third-party or instituted by the United States Patent and Trademark
Office (“U.S. PTO”) to determine who was the first to invent any of the subject matter covered by the patent claims of our
applications.
In addition to the protection afforded by patents, we seek to rely on trade secret protection and confidentiality agreements to
protect proprietary know-how that is not patentable, processes for which patents are difficult to enforce and any other elements of
our drug development processes that involve proprietary know-how, information or technology that is not covered by patents.
Although we require all of our employees to assign their inventions to us, and all of our employees, consultants, advisors and any
third parties who have access to our proprietary know-how, information or technology to enter into confidentiality agreements,
we cannot be certain that our trade secrets and other confidential proprietary information will not be disclosed or that competitors
will not otherwise gain access to our trade secrets or independently develop substantially equivalent information and techniques.
Further, the laws of some foreign countries do not protect proprietary rights to the same extent or in the same manner as the laws
of the United States. As a result, we may encounter significant problems in protecting and defending our intellectual property
both in the United States and abroad. If we are unable to prevent material disclosure of the intellectual property related to our
technologies to third parties, we will not be able to establish or maintain a competitive advantage in our market, which could
materially adversely affect our business, results of operations and financial condition.
We may be involved in lawsuits to protect or enforce our patents or the patents of our licensors, which could be expensive,
time consuming and unsuccessful.
Competitors may infringe our patents or the patents of our licensors. To counter infringement or unauthorized use, we may be
required to file infringement claims, which can be expensive and time-consuming. In addition, in an infringement proceeding, a
court may decide that a patent of ours or our licensors is not valid or is unenforceable, or may refuse to stop the other party from
using the technology at issue on the grounds that our patents do not cover the technology in question. An adverse result in any
litigation or defense proceedings could put one or more of our patents at risk of being invalidated, held unenforceable or
interpreted narrowly and could put our patent applications at risk of not issuing.
Because Rubraca does not contain a previously approved active ingredient, the Hatch-Waxman Act provides a five-year
period of new chemical entity (“NCE”) exclusivity following its December 19, 2016 approval during which time generic
competitors cannot file an Abbreviated New Drug Application (ANDA) for a generic version of Rubraca, unless the submission
contains a Paragraph IV Certification that one or more patents listed in the Orange Book for Rubraca are invalid, unenforceable
or will not be infringed by a proposed ANDA product, in which case the submission may be made four years following the
original drug approval. That is, under the provisions of the Hatch-Waxman Act, December 19, 2020 was the earliest date that a
generic competitor could submit an ANDA to the FDA requesting permission to market
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a generic version of Rubraca. To date, we do not have an indication that an ANDA has been filed. However, a generic company
may have submitted an ANDA, for which we would receive a Paragraph IV Notice Letter in the future. If a Paragraph IV
Certification is made, the generic company is required to provide a Paragraph IV Notice Letter advising Clovis of the
certification. If that occurs, Clovis will have the opportunity to bring a patent infringement action against the generic company. If
such a suit is filed within the 45-day period following receipt of the Paragraph IV Notice Letter, the Hatch-Waxman Act provides
for a 30-month stay on FDA’s ability to grant final approval of the proposed generic product. The 30-month stay generally runs
from the date the Paragraph IV Notice Letter is received. However, when a Paragraph IV certification is received during the five-
year period of NCE exclusivity following the date of first NDA approval, the thirty-month stay extends from five years after the
date that product was first approved. The 30-month stay may be shortened or lengthened, including due to a settlement of a
lawsuit, a court order (including a decision by the district court on the merits of the case), or patent expiration. The party filing
the ANDA may also counterclaim in the litigation that one or more of our patents are invalid, unenforceable, and/or not infringed.
If all of the Orange-Book listed patents were found invalid, enforceable, and/or not infringed, a competing generic product could
be marketed prior to expiration of those patents, which would harm our business.
Interference proceedings provoked by third parties or brought by the U.S. PTO may be necessary to determine the priority of
inventions with respect to our patents or patent applications or those of our licensors. An unfavorable outcome could require us to
cease using the related technology or to attempt to license rights to it from the prevailing party. Our business could be harmed if
the prevailing party does not offer us a license on commercially reasonable terms. Litigation or interference proceedings may fail
and, even if successful, may result in substantial costs and distract our management and other employees.
We may not be able to prevent, alone or with our licensors, misappropriation of our trade secrets or confidential information,
particularly in countries where the laws may not protect those rights as fully as in the United States. Furthermore, because of the
substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our
confidential information could be compromised by disclosure during this type of litigation. In addition, there could be public
announcements of the results of hearings, motions or other interim proceedings or developments. If securities analysts or
investors perceive these results to be negative, it could have a substantial adverse effect on the price of our common stock.
Third-party claims of intellectual property infringement may prevent or delay our drug discovery and development efforts.
Our commercial success depends in part on our avoiding infringement of the patents and proprietary rights of third parties.
There is a substantial amount of litigation involving patent and other intellectual property rights in the biotechnology and
pharmaceutical industries, including interference, inter parties review and reexamination proceedings before the U.S. PTO or
oppositions and other comparable proceedings in foreign jurisdictions. Numerous United States and foreign issued patents and
pending patent applications, which are owned by third parties, exist in the fields in which we are developing product candidates.
As the biotechnology and pharmaceutical industries expand and more patents are issued, the risk increases that our product
candidates may give rise to claims of infringement of the patent rights of others.
Third parties may assert that we are employing their proprietary technology without authorization. There may be third-party
patents with claims to materials, formulations, methods of manufacture or methods for treatment related to the use or
manufacture of our product candidates. Because patent applications can take many years to issue, there may be currently pending
patent applications, which may later result in issued patents that our product candidates may infringe. In addition, third parties
may obtain patents in the future and claim that use of our technologies infringes upon these patents. If any third-party patents
were held by a court of competent jurisdiction to cover the manufacturing process of any of our product candidates, any
molecules formed during the manufacturing process or any final product itself, the holders of any such patents may be able to
block our ability to commercialize such product candidate unless we obtain a license under the applicable patents, or until such
patents expire or they are finally determined to be held invalid or unenforceable. Similarly, if any third-party patent were held by
a court of competent jurisdiction to cover aspects of our formulations, processes for manufacture or methods of use, including
combination therapy or patient selection methods, the holders of any such patent may be able to block our ability to develop and
commercialize the applicable product candidate unless we obtain a license, limit our uses, or until such patent expires or is finally
determined to be held invalid or unenforceable. In either case, such a license may not be available on commercially reasonable
terms or at all.
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Parties making claims against us may obtain injunctive or other equitable relief, which could effectively block our ability to
further develop and commercialize one or more of our product candidates. Defense of these claims, regardless of their merit,
would involve substantial litigation expense and would be a substantial diversion of employee resources from our business. In the
event of a successful claim of infringement against us, we may have to pay substantial damages, including treble damages and
attorneys’ fees for willful infringement, obtain one or more licenses from third parties, limit our uses, pay royalties or redesign
our infringing product candidates, which may be impossible or require substantial time and monetary expenditure. We cannot
predict whether any such license would be available at all or whether it would be available on commercially reasonable terms.
Furthermore, even in the absence of litigation, we may need to obtain licenses from third parties to advance our research or allow
commercialization of our product candidates. We may fail to obtain any of these licenses at a reasonable cost or on reasonable
terms, if at all. In that event, we would be unable to further develop and commercialize one or more of our product candidates,
which could harm our business significantly.
The patent protection, patent prosecution and patent enforcement for some of our product candidates is dependent on third
parties.
While we normally seek and gain the right to fully prosecute, maintain and enforce the patents relating to our product
candidates, there may be times when platform technology patents that relate to our product candidates are controlled by our
licensors. This is the case with the method of use patents licensed under the AstraZeneca license. If AstraZeneca or any of our
future licensing partners fail to appropriately prosecute, maintain or enforce, as applicable, patent protection for patents covering
any of our product candidates, our ability to develop and commercialize those product candidates may be adversely affected and
we may not be able to prevent competitors from making, using and selling competing products.
We may not be able to protect our intellectual property rights throughout the world.
Filing, prosecuting and defending patents on all of our product candidates throughout the world would be prohibitively
expensive. Competitors may use our technologies in jurisdictions where we have not obtained patent protection to develop their
own products and further, may export otherwise infringing products to territories where we have patent protection, but
enforcement is not as strong as that in the United States. These products may compete with our products in jurisdictions where
we do not have any issued patents and our patent claims or other intellectual property rights may not be effective or sufficient to
prevent them from competing.
Many companies have encountered significant problems in protecting and defending intellectual property rights in foreign
jurisdictions. The legal systems of certain countries, particularly certain developing countries, do not favor the enforcement of
patents and other intellectual property protection, particularly those relating to biopharmaceuticals, which could make it difficult
for us to stop the infringement of our patents or marketing of competing products in violation of our proprietary rights generally.
Proceedings to enforce our patent rights in foreign jurisdictions could result in substantial cost and divert our efforts and attention
from other aspects of our business.
If we breach any of the agreements under which we license commercialization rights to our product candidates from third
parties, we could lose license rights that are important to our business.
We license the use, development and commercialization rights for all of our product candidates, and may enter into similar
licenses in the future. Under each of our existing license agreements we are subject to commercialization and development,
diligence obligations, milestone payment obligations, royalty payments and other obligations. If we fail to comply with any of
these obligations or otherwise breach our license agreements, including by failing to use commercially reasonable efforts to
develop or commercialize the product candidate, our licensing partners may have the right to terminate the license in whole or in
part. Generally, the loss of any one of our licenses or other licenses in the future could materially harm our business, prospects,
financial condition and results of operations.
Intellectual property rights do not necessarily address all potential threats to our competitive advantage.
The degree of future protection afforded by our intellectual property rights is uncertain because intellectual property rights
have limitations, and may not adequately protect our business, or permit us to maintain our competitive advantage. The following
examples are illustrative:
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others may be able to make compounds that are similar to our product candidates but that are not covered by the claims
of the patents that we own or have exclusively licensed;
● we or our licensors or strategic partners might not have been the first to make the inventions covered by the issued
patent or pending patent application that we own or have exclusively licensed;
● we or our licensors or strategic partners might not have been the first to file patent applications covering certain of our
inventions;
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others may independently develop similar or alternative technologies or duplicate any of our technologies without
infringing our intellectual property rights;
it is possible that our pending patent applications will not lead to issued patents;
issued patents that we own or have exclusively licensed may not provide us with any competitive advantages, or may be
held invalid or unenforceable, as a result of legal challenges by our competitors;
our competitors might conduct research and development activities in countries where we do not have patent rights and
then use the information learned from such activities to develop competitive products for sale in our major commercial
markets;
● we may not develop additional proprietary technologies that are patentable; and
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the patents of others may have an adverse effect on our business.
Should any of these events occur, they could significantly harm our business, results of operations and prospects.
Risks Related to Ownership of our Common Stock, Convertible Senior Notes and Long-term Debt
Our operating results are difficult to predict and may fluctuate. If our operating results are below the expectations of
securities analysts or investors, the trading price of our stock could decline.
Our operating results are difficult to predict and may fluctuate significantly from quarter to quarter and year to year. As a
result, although we may provide sales guidance for Rubraca from time to time, you should not rely on Rubraca sales results in
any period as being indicative of future performance. In addition, such guidance is based on assumptions that may be incorrect or
that may change from quarter to quarter, and it may be particularly difficult to correctly forecast sales in indications for which we
have recently received marketing approval. Moreover, sales of Rubraca have, on occasion, been below the expectations of
securities analysts and investors and have been below prior period sales, and sales of Rubraca in the future may also be below
prior period sales, our own guidance and/or the expectations of securities analysts and investors. To the extent that we do not
meet any guidance we may give or the expectations of analysts or investors, our stock price may be adversely impacted, perhaps
significantly. We believe that our quarterly and annual results of operations may be affected by a variety of factors, including:
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customer ordering patterns for Rubraca, which may vary significantly from period to period;
the overall level of demand for Rubraca, including the impact of any competitive products and the duration of therapy
for patients receiving Rubraca;
the extent to which coverage and reimbursement for Rubraca is available from government and health administration
authorities, private health insurers, managed care programs and other third-party payors;
our ability to establish or demonstrate to patients and the medical community the safety, efficacy or value of Rubraca
and its perceived advantages compared to existing and future therapies in the recurrent ovarian cancer indications and
other indications for which Rubraca may receive approval in the future;
changes in the amount of deductions from gross sales, including government-mandated rebates, chargebacks and
discounts that can vary because of changes to the government discount percentage, including increases in the
government discount percentage resulting from price increases we have taken or may take in the future, or due to
different levels of utilization by entities entitled to government rebates and discounts and changes in patient
demographics;
increases in the scope of eligibility for customers to purchase Rubraca at the discounted government price or to obtain
government-mandated rebates on purchases of Rubraca;
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changes in our cost of sales;
the incidence rate of new patients in Rubraca’s approved indications;
the timing, cost and level of investment in our sales and marketing efforts to support Rubraca sales; and
the timing, cost and level of investment in our research and development and other activities involving Rubraca,
lucitanib and our other product candidates by us or our collaborators.
Further, changes in our operations, such as increased development, manufacturing and clinical trial expenses in connection
with our development programs, or our undertaking of additional programs, or business activities, or entry into strategic
transactions, including potential future acquisitions of products, technologies or businesses may also cause significant
fluctuations in our expenses.
For these and other reasons, it is difficult for us to accurately forecast future sales of Rubraca, operating expenses or future
profits or losses. As a result, our operating results in future periods could be below any guidance we may give or the expectations
of securities analysts or investors, which could cause the trading price of our common stock to decline, perhaps substantially.
The price of our stock has been, and may continue to be, volatile, and you could lose all or part of your investment.
The trading price of our common stock has been, and may continue to be, volatile and could be subject to wide fluctuations in
response to various factors, some of which are beyond our control. During the 12-month period ended December 31, 2020, the
price of our common stock on the NASDAQ Global Select Market ranged from $3.62 per share to $11.63 per share. In addition
to the factors discussed in this “Risk Factors” section and elsewhere in this report, these factors include:
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adverse results of regulatory actions or decisions;
our failure to successfully commercialize our products;
actual or anticipated adverse results or delays in our clinical trials;
unanticipated serious safety concerns related to the use of any of our products;
changes in laws or regulations applicable to our products, including but not limited to clinical trial requirements for
approvals;
disputes or other developments relating to proprietary rights, including patents, litigation matters and our ability to
obtain patent protection for our products;
our decision to initiate a clinical trial, not to initiate a clinical trial or to terminate an existing clinical trial;
inability to obtain adequate product supply for any approved drug product or inability to do so at acceptable prices;
our dependence on third parties, including CMOS and CROs, as well as our partners that provide us with companion
diagnostic products;
additions or departures of key scientific or management personnel;
failure to meet or exceed any financial guidance or expectations regarding development milestones that we may provide
to the public;
actual or anticipated variations in quarterly operating results;
failure to meet or exceed the estimates and projections of the investment community;
overall performance of the equity markets and other factors that may be unrelated to our operating performance or the
operating performance of our competitors, including changes in market valuations of similar companies;
conditions or trends in the biotechnology and biopharmaceutical industries;
introduction of new products offered by us or our competitors;
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announcements of significant acquisitions, strategic partnerships, joint ventures or capital commitments by us or our
competitors;
issuances of debt or equity securities and perceptions of our ability to issue additional debt and equity securities to
refinance our debt obligations and to fund our operations;
significant lawsuits, including patent or stockholder litigation;
sales of our common stock by us or our stockholders in the future;
trading volume of our common stock;
publication of research reports about us or our industry or positive or negative recommendations or withdrawal of
research coverage by securities analysts;
ineffectiveness of our internal controls;
general political and economic conditions;
effects of natural or man-made catastrophic events; and
other events or factors, many of which are beyond our control.
In addition, the stock market in general, and the NASDAQ Global Select Market and biotechnology companies in particular,
have experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating
performance of these companies. Broad market and industry factors may negatively affect the market price of our common stock,
regardless of our actual operating performance. The realization of any of the above risks or any of a broad range of other risks,
including those described in these “Risk Factors,” could have a dramatic and material adverse effect on the market price of our
common stock.
Because our outstanding Notes are convertible into shares of our common stock, volatility or depressed prices of our common
stock could have a similar effect on the trading price of our Notes. In addition, the existence of the Notes may encourage short
selling in our common stock by market participants because the conversion of the Notes could depress the price of our common
stock.
The conversion of some or all of the Notes may dilute the ownership interest of existing stockholders. Holders of the
outstanding 2021 Notes are able to convert them at any time prior to the close of business on the business day immediately
preceding September 15, 2021. Holders of the outstanding 2025 Notes are able to convert them at any time prior to the close of
business on the business day immediately preceding May 1, 2025. Holders of the outstanding 2024 Notes are able to convert
them at any time prior to the close of business on the business day immediately preceding August 1, 2024. Upon conversion,
holders of the Notes will receive shares of common stock. Any sales in the public market of shares of common stock issued upon
conversion of such Notes could adversely affect the trading price of our common stock. We cannot predict the size of future
issuances or the effect, if any, that they may have on the market price of our common stock. The issuance and sale of substantial
amounts of common stock, or the perception that such issuances and sales may occur, could adversely affect the market price of
our common stock and impair our ability to raise capital through the sale of additional equity or convertible debt securities.
Following periods of volatility in a company’s stock price, litigation has often been initiated against companies. Following the
decline in our stock price related to the rociletinib regulatory update in November 2015, a number of lawsuits have been filed
against us and settled. The remaining litigation related to rociletinib are discussed in Part I, Item 3-Legal Proceedings. These
proceedings and other similar litigation, if instituted against us, could result in substantial costs and diversion of management’s
attention and resources, which could materially and adversely affect our business and financial condition.
Our ATHENA clinical trial financing agreement contains a number of covenants and other provisions, which, if violated,
could result in the immediate acceleration of our outstanding indebtedness.
Pursuant to our ATHENA clinical trial financing agreement, we are required to repay amounts we borrow from the lenders,
capped at specific quarterly amounts, based upon the revenues generated from the sales of Rubraca and other amounts we receive
in connection with any out-licensing arrangement or settlement we may enter into with respect to Rubraca. If the total payments
made on or prior to December 30, 2025 are less than the total amount borrowed prior to
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such time, we also would be required to make an additional lump-sum payment to the lenders equal to the amount of that shortfall
on that date. Following that date, quarterly payments continue until the lenders have received payments equal to twice the amount
borrowed under the financing agreement.
Pursuant to the financing agreement, we have agreed to certain limitations on our operations, including limitations on
dividends, stock repurchases and repayments of certain indebtedness, and to certain covenants, including with respect to the
conduct of the ATHENA trial. Our obligations under the financing agreement are secured by first priority security interests in all
of our assets related to Rubraca, including intellectual property rights.
If an event of default (including a breach or default under, or termination of, any of our material in-license agreements and
defaults under our other material indebtedness) occurs under the financing agreement, the lenders have the right to demand
immediate repayment of our obligations, which may be as high as the greater of (x) twice the amount borrowed thereunder and
(y) the amount borrowed thereunder plus either $35.0 million (if the payment is made in 2019) or $50.0 million (if the payment is
made after 2019).
In addition, if we do not pay our obligations under the financing agreement when due, including at maturity or upon the
occurrence of a liquidity event, which includes a change of control of us or upon demand following the occurrence of an event of
default, the lenders would have the right to foreclose on the assets we have pledged as collateral and sell those assets, with the
proceeds of the sale being applied to repay the indebtedness.
There can be no assurance that we will not breach the covenants or other terms of, or that an event of default will not occur
under, the financing agreement and, if a breach or event of default occurs, there can be no assurance that we will be able to obtain
necessary waivers or amendments from the lenders or refinance the related indebtedness on terms we find acceptable, or at all. A
default under the financing agreement may also trigger defaults under the indentures governing our senior convertible notes.
As a result, any failure to pay our obligations when due, any breach or default of our covenants or other obligations under the
financing agreement, or any other event that allows any lender to demand immediate repayment of borrowings, could have a
material adverse effect on our business, results of operations, financial condition and prospects. Furthermore, the financing
agreement may make us less attractive to potential acquirers; and in the event of a change of control of us, the required discharge
of the financing agreement out of our available cash or acquisition proceeds would reduce proceeds available to our stockholders.
Future sales and issuances of our common stock or rights to purchase common stock, including pursuant to our equity
incentive plans, could result in additional dilution of the percentage ownership of our stockholders and could cause our stock
price to fall.
We expect that significant additional capital will be needed in the future to continue our planned operations. To raise capital,
we may sell common stock, convertible securities or other equity securities in one or more transactions at prices and in a manner
we determine from time to time. If we sell common stock, convertible securities or other equity securities in more than one
transaction, investors may be materially diluted by subsequent sales. Such sales may also result in material dilution to our
existing stockholders, and new investors could gain rights, preferences and privileges senior to those of holders of our common
stock.
Shares of common stock that are reserved for future issuance under the Notes will become eligible for sale in the public
market to the extent permitted by the terms of the Notes. If these additional shares of common stock are sold, or if it is perceived
that they will be sold, in the public market, the trading price of our common stock could decline.
Pursuant to our equity incentive plan(s), our compensation committee (or its designee) is authorized to grant equity-based
incentive awards to our employees, directors and consultants. See Part II, Item 5-Market for Registrant’s Common Equity,
Related Stockholder Matters and Issuer Purchases of Equity Securities for the number of shares of our common stock available
for future grant under our 2011 Stock Incentive Plan. Future option and restricted stock unit grants and issuances of common
stock under our 2011 Plan may have an adverse effect on the market price of our common stock. In addition, a substantial
number of shares of our common stock are reserved for issuance upon conversion of the Notes.
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Some provisions of our charter documents and Delaware law may have anti-takeover effects that could discourage an
acquisition of us by others, even if an acquisition would be beneficial to our stockholders and may prevent attempts by our
stockholders to replace or remove our current management.
Provisions in our amended and restated certificate of incorporation and bylaws, as well as provisions of Delaware law, could
make it more difficult for a third-party to acquire us or increase the cost of acquiring us, even if doing so would benefit our
stockholders or remove our current management. These provisions include:
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authorizing the issuance of “blank check” preferred stock, the terms of which may be established and shares of which
may be issued without stockholder approval;
limiting the removal of directors by the stockholders;
creating a staggered board of directors;
prohibiting stockholder action by written consent, thereby requiring all stockholder actions to be taken at a meeting of
our stockholders;
eliminating the ability of stockholders to call a special meeting of stockholders;
permitting our board of directors to accelerate the vesting of outstanding option grants upon certain transactions that
result in a change of control; and
establishing advance notice requirements for nominations for election to the board of directors or for proposing matters
that can be acted upon at stockholder meetings.
These provisions may frustrate or prevent any attempts by our stockholders to replace or remove our current management by
making it more difficult for stockholders to replace members of our board of directors, which is responsible for appointing the
members of our management. Because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the
General Corporation Law of the State of Delaware, which may discourage, delay or prevent someone from acquiring us or
merging with us whether or not it is desired by or beneficial to our stockholders. Under Delaware law, a corporation may not, in
general, engage in a business combination with any holder of 15% or more of its capital stock unless the holder has held the stock
for three years or, among other things, the board of directors has approved the transaction. Any provision of our certificate of
incorporation or bylaws or Delaware law that has the effect of delaying or deterring a change in control could limit the
opportunity for our stockholders to receive a premium for their shares of our common stock, and could also affect the price that
some investors are willing to pay for our common stock. Additionally, certain provisions of our outstanding Notes could make it
more difficult or more expensive for a third party to acquire us. The repurchase price of the Notes must be paid in cash, and this
obligation may have the effect of discouraging, delaying or preventing an acquisition of the Company that would otherwise be
beneficial to our security holders.
If securities or industry analysts do not publish research or publish inaccurate or unfavorable research about our business,
our stock price and trading volume could decline.
The trading market for our common stock depends in part on the research and reports that securities or industry analysts
publish about us or our business. If one or more of the analysts who cover us downgrades our stock or publishes inaccurate or
unfavorable research about our business, our stock price would likely decline. If one or more of these analysts ceases coverage of
our company or fails to publish reports on us regularly, demand for our stock could decrease, which might cause our stock price
and trading volume to decline.
There may not be a viable public market for our common stock and as a result it may be difficult for you to sell your shares of
our common stock.
Our common stock had not been publicly traded prior to our initial public offering in November 2011. An active trading
market for our common stock on the NASDAQ Global Select Market may not be sustained. As a result of these and other factors,
you may be unable to resell your shares at a price that is attractive to you or at all. Further, an inactive market may also impair
our ability to raise capital by selling shares of our common stock and may impair our ability to enter into strategic partnerships or
acquire companies or products by using our shares of common stock as consideration.
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ITEM 1B. UNRESOLVED STAFF COMMENTS
Not applicable.
ITEM 2.
PROPERTIES
Our principal offices are located at five leased facilities, a 29,256 square foot facility in Boulder, Colorado used primarily for
corporate functions, a 24,877 square foot facility in San Francisco, CA used for clinical development operations, a 32,660 square
foot facility in Oakland, CA used for clinical development operations and research laboratory space, a 11,805 square foot facility
in Cambridge, United Kingdom used for our European regulatory and clinical operations and a 393 square foot facility in Milan,
Italy used for commercial activities. These leases expire in January 2023, December 2026, April 2028, July 2029 and November
2022, respectively. We also lease office space in several locations throughout Europe. We believe that our existing facilities are
sufficient for our needs for the foreseeable future.
ITEM 3.
LEGAL PROCEEDINGS
See Note 13, Commitments and Contingencies.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
ISSUER PURCHASES OF EQUITY SECURITIES
Market Information and Holders
Our common stock trades on the NASDAQ Global Select market under the symbol “CLVS”.
On February 12, 2021, there were 23 holders of record of our common stock. The holders of record number do not include a
substantially greater number of holders whose shares are held of record in nominee or street name accounts through banks,
brokers and/or other financial institutions.
Dividends
We have never declared or paid any cash dividends on our capital stock. We currently intend to retain all available funds and
any future earnings to support our operations and finance the growth and development of our business. We do not intend to pay
cash dividends on our common stock for the foreseeable future. Any future determination related to our dividend policy will be
made at the discretion of our board of directors and will depend upon, among other factors, our results of operations, financial
condition, capital requirements, contractual restrictions, business prospects and other factors our board of directors may deem
relevant. Pursuant to our ATHENA clinical trial financing agreement, we have agreed to limitations on making certain junior
payments, including the payment of dividends.
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Securities Authorized for Issuance Under Equity Compensation Plans
Equity Compensation Plan Information
As of December 31, 2020
Number of
securities
remaining
available
for issuance
under equity
compensation
plans
(excluding
securities
reflected
in column (a))
(c)
6,310,938
—
6,310,938
Number of securities to
be issued upon exercise
of outstanding options
and restricted stock
(a)
9,464,216
$
—
$
9,464,216
Weighted-
average
exercise price
of outstanding
options
(b)
37.79
—
37.79
Plan Category
Equity compensation plans approved by security holders (1) (2)
Equity compensation plans not approved by security holders
Total
(1) As of December 31, 2020, 6,470,00 shares were authorized for issuance under our 2020 Stock Incentive Plan (“2020 Plan”),
which became effective on April 22, 2020, which is the date the 2020 Plan was approved by our board of directors.
(2) As of December 31, 2020, 361,656 shares were reserved for issuance under our 2011 Employee Stock Purchase Plan
(“ESPP”), which became effective upon closing of our initial public offering in November 2011. The number of shares of
our common stock reserved for issuance under the ESPP will be increased at the discretion of our board of directors, on the
date of each annual meeting of our stockholders, by up to the lesser of (x) a number of additional shares of our common
stock representing 1% of our then-outstanding shares of common stock on such date and (y) 344,828 shares of our common
stock.
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Performance Graph (1)
The following graph shows a comparison from December 31, 2015 through December 31, 2020 of the cumulative total return
on an assumed investment of $100 in cash in our common stock, the NASDAQ Composite Index and the NASDAQ
Biotechnology Index. Such returns are based on historical results and are not intended to suggest future performance. Data for the
NASDAQ Composite Index and the NASDAQ Biotechnology Index assume reinvestment of dividends.
(1) This performance graph shall not be deemed “soliciting material” or to be “filed” with the SEC for purposes of Section 18
of the Securities and Exchange Act of 1934, as amended, or otherwise subject to the liabilities under that Section, and shall
not be deemed incorporated by reference into any filing of Clovis Oncology, Inc. under the Securities Act of 1933, as
amended.
ITEM 6.
SELECTED FINANCIAL DATA
Not required.
ITEM 7.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
You should read the following discussion and analysis of our financial condition and results of operations together with our
financial statements and related notes appearing at the end of this Annual Report on Form 10-K. Some of the information
contained in this discussion and analysis or set forth elsewhere in this Annual Report on Form 10-K, including information with
respect to our plans and strategy for our business and related financing, includes forward-looking statements that involve risks
and uncertainties. You should read the “Risk Factors” section of this report for a discussion of important factors that could
cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in
the following discussion and analysis.
Overview
We are a biopharmaceutical company focused on acquiring, developing and commercializing innovative anti-cancer agents in
the United States, Europe and additional international markets. We target our development programs for the treatment of specific
subsets of cancer populations, and simultaneously develop, with partners, for those indications that
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require them, diagnostic tools intended to direct a compound in development to the population that is most likely to benefit from
its use.
Our marketed product Rubraca® (rucaparib), an oral small molecule inhibitor of poly ADP-ribose polymerase (“PARP”), is
marketed in the United States for two indications specific to recurrent epithelial ovarian, fallopian tube or primary peritoneal
cancer and also an indication specific to metastatic castration-resistant prostate cancer (“mCRPC”). The initial indication
received approval from the FDA in December 2016 and covers the treatment of adult patients with deleterious BRCA (human
genes associated with the repair of damaged DNA) mutation (germline and/or somatic)-associated epithelial ovarian, fallopian
tube, or primary peritoneal cancer who have been treated with two or more chemotherapies and selected for therapy based on an
FDA-approved companion diagnostic for Rubraca. In April 2018, the FDA also approved Rubraca for the maintenance treatment
of adult patients with recurrent epithelial ovarian, fallopian tube, or primary peritoneal cancer who are in a complete or partial
response to platinum-based chemotherapy. The approval in this second, broader and earlier-line indication on a priority review
timeline was based on positive data from the phase 3 ARIEL3 clinical trial. Diagnostic testing is not required for patients to be
prescribed Rubraca in this maintenance treatment indication.
In May 2020, the FDA approved Rubraca for the treatment of adult patients with mCRPC associated with a deleterious BRCA
mutation (germline and/or somatic) who have been treated previously with androgen receptor-directed therapy and a taxane-
based chemotherapy. The FDA approved this third indication under accelerated approval based on objective response rate and
duration of response data from the TRITON2 clinical trial. We launched Rubraca for this indication in the U.S. following receipt
of the approval. As an accelerated approval, continued approval for this indication may be contingent upon verification and
description of clinical benefit in confirmatory trials. The TRITON3 clinical trial is expected to serve as the confirmatory study
for Rubraca’s approval in mCRPC. In August 2020, the FDA approved the use of Foundation Medicine’s blood-based diagnostic
test, FoundationOne Liquid CDx, as a companion diagnostic for the detection of deleterious BRCA mutation (germline and/or
somatic) to select mCRPC patients for treatment with Rubraca.
In Europe, the European Commission granted a conditional marketing authorization in May 2018 for Rubraca as monotherapy
treatment of adult patients with platinum-sensitive, relapsed or progressive, BRCA mutated (germline and/or somatic), high-grade
epithelial ovarian, fallopian tube, or primary peritoneal cancer, who have been treated with two or more prior lines of platinum-
based chemotherapy, and who are unable to tolerate further platinum-based chemotherapy. In January 2019, the European
Commission granted a variation to the marketing authorization to include the maintenance treatment of adult patients with
recurrent epithelial ovarian, fallopian tube, or primary peritoneal cancer who are in a complete or partial response to platinum-
based chemotherapy. With this approval, Rubraca is authorized in Europe for certain patients in the recurrent ovarian cancer
maintenance setting regardless of their BRCA mutation status. Following successful reimbursement negotiations, Rubraca has
been launched in each of Germany, United Kingdom, Italy, France, Spain and the Netherlands, and reimbursement is pending in
Switzerland.
In December 2020, Rubraca met the primary study endpoint of significantly improving PFS versus chemotherapy in the
ARIEL4 confirmatory study. Additional ARIEL4 study results are expected to be submitted for presentation at a medical
congress meeting in 2021. ARIEL4 is a Phase 3 multicenter, randomized study of Rubraca versus chemotherapy, which enrolled
relapsed ovarian cancer patients with BRCA mutations (inclusive of germline and/or somatic) who had received two or more
prior lines of chemotherapy. Completion of ARIEL4 is a post-marketing commitment in the U.S. and Europe.
Beyond our labeled indications, we have a clinical development program underway to further evaluate Rubraca in a variety of
solid tumor types, either as monotherapy or in combination with other agents, including several studies as part of our ongoing
clinical collaboration with Bristol Myers Squibb to evaluate its immunotherapy Opdivo (nivolumab) in combination with
Rubraca. We anticipate initial data of Rubraca monotherapy versus placebo from our ATHENA study in the second half of 2021,
with the results of Rubraca versus Opdivo in all study populations a year or more later. However, the timing of the ATHENA
data readouts is dependent on the timing of data maturity driven by PFS events.
We initiated the Phase 2 LODESTAR study in December 2019 to evaluate Rubraca as monotherapy treatment in patients with
recurrent solid tumors associated with a deleterious mutation in homologous recombination repair genes. Based on our
interactions with the FDA, we believe that this study may be registration-enabling for a targeted gene- and tumor-agnostic label,
if data from the trial support the potential for an accelerated approval. Assuming enrollment in this
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study continues as planned, and subject to the data, we may potentially file an sNDA with the FDA for this indication in the
second half of 2021 or the first half of 2022.
Pursuant to our license and collaboration agreement with 3BP, entered into in September 2019, we have initiated development
of a peptide-targeted radionuclide therapy (“PTRT”) and imaging agent targeting fibroblast-activating protein (“FAP”). We have
completed sufficient preclinical work to support an IND for the lead candidate under our license and collaboration agreement,
designated internally as FAP-2286. Accordingly, we submitted two INDs for FAP-2286 for use as imaging and treatment agents
in December 2020 to support an initial Phase 1 study to determine the dose and tolerability of FAP-2286 as a therapeutic agent
with expansion cohorts planned in multiple tumor types as part of a global development program. The INDs are expected to
become effective following receipt and submission, and acceptance by the FDA, of satisfactory chemistry, manufacturing and
controls (“CMC”) data for the imaging agent from clinical sites. The FAP-targeting imaging agent will be utilized to identify
tumors that contain FAP for treatment in the Phase 1 LuMIERE clinical study, which we anticipate initiating in the first half of
2021.
In addition to our planned studies, the University of California San Francisco is sponsoring a separate, investigator-initiated,
imaging-only study with gallium-68 labeled FAP-2286 (NCT04621435) to evaluate FAP expression in multiple tumor types;
their study is currently recruiting. We hold U.S. and global rights to FAP-2286, excluding Europe (defined to include Russia,
Turkey and Israel), where 3BP retains rights. We are also collaborating with 3BP on a discovery program directed to up to three
additional, undisclosed targets for targeted radionuclide therapy, to which we would obtain global rights for any resulting product
candidates.
Lucitanib, our second product candidate currently in clinical development, is an investigational, oral, potent angiogenesis
inhibitor which inhibits vascular endothelial growth factor receptors 1 through 3 (“VEGFR1-3”), platelet-derived growth factor
receptors alpha and beta (“PDGFR α/β”) and fibroblast growth factor receptors 1 through 3 (“FGFR1-3”). Lucitanib inhibits the
same three pathways as Lenvima® (lenvatinib), which has received an FDA approval for use in endometrial cancer in
combination with Keytruda® (pembrolizumab), a PD-1 inhibitor. This, together with preclinical data for lucitanib in combination
with a PD-1 inhibitor that demonstrated enhanced anti-tumor activity compared to that of single agents, represent a scientific
rationale for development of lucitanib in combination with a PD-1 inhibitor, and in February 2019, lucitanib was added to our
clinical collaboration with Bristol Myers Squibb. The Clovis-sponsored LIO-1 study of lucitanib in combination with nivolumab
in advanced solid tumors and gynecologic cancers is currently enrolling patients in the Phase 2 part of the study. We expect to
present interim data from this study at medical meetings in 2021, which are expected to include interim results from the ovarian
and endometrial cancer expansion cohorts. We hold the global (excluding China) development and commercialization rights for
lucitanib.
We commenced operations in April 2009. To date, we have devoted substantially all of our resources to identifying and in-
licensing product candidates, performing development activities with respect to those product candidates and the general and
administrative support of these operations. For the year ended December 31, 2020, we generated $164.5 million product revenue
related to sales of Rubraca. We have principally funded our operations using the net proceeds from public offerings of our
common stock, convertible senior notes offerings and our financing agreement related to our ATHENA trial.
We have never been profitable and, as of December 31, 2020, we had an accumulated deficit of $2,612.7 million. We incurred
net losses of $369.2 million, $400.4 million and $368.0 million for the years ended December 31, 2020, 2019 and 2018,
respectively, and had cash and cash equivalents totaling $240.2 million at December 31, 2020.
We expect to incur significant losses for the foreseeable future, as we incur costs related to commercial activities associated
with Rubraca. Based on current estimates, we believe that our cash, cash equivalents and liquidity available under our financing
agreement related to our ATHENA trial will allow us to fund our operating plan through at least the next 12 months. Until we can
generate a sufficient amount of revenue from Rubraca, we expect to finance our operations in part through additional public or
private equity or debt offerings and may seek additional capital through arrangements with strategic partners or from other
sources. Adequate additional financing may not be available to us on acceptable terms, or at all. Our failure to raise capital as and
when needed would have a negative impact on our financial condition and our ability to pursue our business strategy. We will
need to generate significant revenues to achieve profitability, and we may never do so.
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Product License Agreements
For a discussion of our product license agreements, see Note 14, License Agreements, in the Notes to Consolidated Financial
Statements included in Part II, Item 8, Financial Statements and Supplementary Data, of this Annual Report on Form 10-K.
Financial Operations Overview
Revenue
During 2020, we recorded $164.5 million in revenue related to sales of Rubraca. For further discussion of our revenue
recognition policy, see “Critical Accounting Policies and Significant Judgments and Estimates” below. Our ability to generate
revenue and become profitable depends upon our ability to successfully commercialize products. Any inability on our part to
successfully commercialize Rubraca in the United States, Europe and any foreign territories where it may be approved, or any
significant delay in such approvals, could have a material adverse impact on our ability to execute upon our business strategy
and, ultimately, to generate sufficient revenues from Rubraca to reach or maintain profitability or sustain our anticipated levels of
operations.
We supply commercially labeled Rubraca free of charge to eligible patients who qualify due to financial need through our
patient assistance program and the majority of these patients are on Medicare. This product is distributed through a separate
vendor who administers the program on our behalf. It is not distributed through our specialty distributor and specialty pharmacy
network. This product is neither included in the transaction price nor the variable considerations to arrive at product revenue.
Manufacturing costs associated with this free product is included in selling, general and administrative expenses. For the year
ended December 31, 2020 and 2019, the supply of this free drug was approximately 17% and 20%, respectively, of the overall
commercial supply or the equivalent of $30.4 million and $34.8 million, respectively, in commercial value.
Our ability to generate product revenue for the year ended December 31, 2020 was negatively affected by the COVID-19
pandemic due to fewer diagnoses and fewer patients going to in-person office visits as oncology practices and patients continue
to adapt to the impact of the virus. As a result of the COVID-19 pandemic, our U.S. and European sales forces have had physical
access to hospitals, clinics, doctors and pharmacies curtailed and/or have been limited. Our European launches in Italy, Spain and
France occurred in an environment in which our field-based personnel in those countries have not been allowed to visit hospitals
since late February 2020. Similarly, we launched Rubraca for prostate cancer in the U.S beginning in May 2020, but our physical
access to hospital, clinics, doctors and pharmacies has been limited.
Research and Development Expenses
Research and development expenses consist of costs incurred for the development of our product candidates and companion
diagnostics, which include:
●
license fees and milestone payments related to the acquisition of in-licensed products, which are reported on our
Consolidated Statements of Operations and Comprehensive Loss as acquired in-process research and development;
employee-related expenses, including salaries, benefits, travel and share-based compensation expense;
expenses incurred under agreements with CROs and investigative sites that conduct our clinical trials;
the cost of acquiring, developing and manufacturing clinical trial materials;
costs associated with non-clinical activities and regulatory operations;
●
●
●
●
● market research and disease education; and
●
activities associated with the development of companion diagnostics for our product candidates.
Research and development costs are expensed as incurred. License fees and milestone payments related to in-licensed
products and technology are expensed if it is determined that they have no alternative future use. Costs for certain development
activities, such as clinical trials and manufacturing of clinical supply, are recognized based on an evaluation of the progress to
completion of specific tasks using data such as patient enrollment, clinical site activations or information provided to us by our
vendors. Our research and development expenses decreased for 2020 compared to 2019. We expect research and development
costs to be lower in the full year 2021 compared to 2020.
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We did not see material disruption to our clinical trials as a result of the COVID-19 pandemic for the year ended December
31, 2020 as we completed target enrollment of ATHENA, our largest clinical trial, during the second quarter. However, we may
see disruption during 2021. For example, new patient recruitment in certain clinical studies may be affected and the conduct of
clinical trials may vary by geography as some regions are more adversely affected. Additionally, we may slow or delay
enrollment in certain trials to manage expenses.
The following table identifies research and development and acquired in-process research and development costs on a
program-specific basis for our products under development. Personnel-related costs, depreciation and share-based compensation
are not allocated to specific programs, as they are deployed across multiple projects under development and, as such, are
separately classified as personnel and other expenses in the table below.
2020
Year Ended December 31,
2019
(in thousands)
2018
Rucaparib Expenses
Research and development
Rucaparib Total
FAP Expenses
Research and development
Acquired in-process research and development
FAP Total
Lucitanib Expenses
Research and development
Lucitanib Total
Rociletinib Expenses
Research and development
Rociletinib Total
Personnel and other expenses
Total
$ 159,364
159,364
$ 184,617
184,617
$ 153,083
153,083
6,928
—
6,928
6,860
6,860
3,633
9,440
13,073
5,128
5,128
—
—
786
786
(1,089)
(1,089)
85,644
$ 257,707
1,101
1,101
88,667
$ 292,586
2,391
2,391
75,087
$ 231,347
Selling, General and Administrative Expenses
Selling, general and administrative expenses consist principally of salaries and related costs for personnel in executive,
commercial, finance, legal, investor relations, human resources and information technology functions. Other general and
administrative expenses include facilities expenses, communication expenses, information technology costs, corporate insurance
and professional fees for legal, consulting and accounting services. With the FDA approval of Rubraca on December 19, 2016, all
sales and marketing expenses associated with Rubraca are included in selling, general and administrative expenses. As a result of
the COVID-19 pandemic, our U.S. and European sales forces have had physical access to hospitals, clinics, doctors and
pharmacies curtailed and/or have been limited, which have decreased sales and marketing expenses during 2020 and will extend
to 2021. In addition, due to increased travel restrictions, quarantines, “work-at-home” and “shelter-in-place” orders and extended
shutdown of certain non-essential business in the United States, and European and Asia-Pacific countries, in-person conferences
and meetings requiring travel have and will continue to decrease resulting in a decrease of our selling, general and administrative
expenses.
The COVID-19 pandemic has accelerated a preference by oncology practices for more digital programming, including digital,
peer-to-peer interactions and reduced in-person promotion. In order to meet these changing preferences, we are adopting a hybrid
commercial strategy combining increased digital promotion activities, greater online resources and more peer-to-peer interactions
with reduced and more targeted in-person promotion. Accordingly, new tools and performance indicators based on this hybrid
approach were rolled out during the fourth quarter, and the U.S. commercial organization was reduced in size by approximately
45 employees during the fourth quarter. Despite increased investment in digital promotion, we anticipate an effect of adopting
this hybrid model will result in annual cost-savings of approximately $10.0 million. We are adopting this strategy in order to
better reach customers in the way they want to be reached with the goal of returning to growth, especially as the ongoing impact
of COVID-19 is reduced.
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Acquired In-Process Research and Development Expenses
Acquired in-process research and development expenses consist of upfront payments to acquire a new drug compound, as well
as subsequent milestone payments. Acquired in-process research and development payments are immediately expensed provided
that the drug has not achieved regulatory approval for marketing and, absent obtaining such approval, has no alternative future
use. Once regulatory approval is received, payments to acquire rights, and the related milestone payments, are capitalized and the
amortization of such assets recorded to product cost of sales.
Other Income and Expense
Other income and expense are primarily comprised of foreign currency gains and losses resulting from transactions with
CROs, investigational sites and contract manufacturers where payments are made in currencies other than the U.S. dollar. Other
expense also includes interest expense recognized related to our convertible senior notes.
Critical Accounting Policies and Significant Judgments and Estimates
Our discussion and analysis of our financial condition and results of operations are based on our financial statements, which
have been prepared in accordance with U.S. generally accepted accounting principles. The preparation of these financial
statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, expenses, revenue
and related disclosures. On an ongoing basis, we evaluate our estimates and judgments, including those related to revenue,
intangible asset impairment, clinical trial accruals and share-based compensation expense. We base our estimates on historical
experience, known trends and events and various other factors that are believed to be reasonable under the circumstances, the
results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily
apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
Our significant accounting policies are described in more detail in the notes to our consolidated financial statements appearing
elsewhere in this Annual Report on Form 10-K. We believe the following accounting policies to be most critical to the judgments
and estimates used in the preparation of our financial statements.
Revenue Recognition
We are currently approved to sell Rubraca in the United States and the EU markets. We distribute our product principally
through a limited number of specialty distributor and specialty pharmacy providers, collectively, our customers. Our customers
subsequently sell our products to patients and health care providers. Separately, we have arrangements with certain payors and
other third parties that provide for government-mandated and privately-negotiated rebates, chargebacks and discounts.
Revenue from product sales are recognized when the performance obligation is satisfied, which is when customers obtain
control of our product at a point in time, typically upon delivery. We expense incremental costs of obtaining a contract as and
when incurred if the expected amortization period of the asset that we would have recognized is one year or less.
Revenues from product sales are recorded at the net sales price (transaction price), which includes estimates of variable
consideration for which reserves are established and which result from price concessions that include rebates, chargebacks,
discounts, co-pay assistance, estimated product returns and other allowances that are offered within contracts between us and our
customers, health care providers, payors and other indirect customers relating to the sales of our product. These reserves are
based on the amounts earned or to be claimed on the related sales and are classified as reductions of accounts receivable or a
current liability. Where appropriate, these estimates take into consideration a range of possible outcomes which are probability-
weighted for relevant factors such as our historical experience, current contractual and statutory requirements, specific known
market events and trends, industry data and forecasted customer buying and payment patterns. Overall, these reserves reflect our
best estimates of the amount of consideration to which we are entitled based on the terms of the contract. The amount of variable
consideration which is included in the transaction price may be constrained and is included in the net sales price only to the
extent that it is probable that a significant reversal in the amount of the cumulative revenue recognized will not occur in a future
period. Actual amounts of consideration ultimately received may differ from our estimates. If actual results in the future vary
from our estimates, we adjust these estimates, which would affect product revenue and earnings in the period such variances
become known.
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For the year ended December 31, 2020, we recognized $164.5 million of product revenue. For a complete discussion of the
accounting for product revenue, see Note 3, Revenue Recognition.
Accrued Research and Development Expenses
As part of the process of preparing our financial statements, we are required to estimate our accrued expenses. This process
involves reviewing open contracts and purchase orders, communicating with our personnel to identify services that have been
performed on our behalf and estimating the level of service performed and the associated cost incurred for the service when we
have not yet been invoiced or otherwise notified of the actual cost. The majority of our service providers invoice us monthly in
arrears for services performed or when contractual milestones are met. We make estimates of our accrued expenses as of each
balance sheet date in our financial statements based on facts and circumstances known to us at that time. We periodically confirm
the accuracy of our estimates with the service providers and make adjustments if necessary. Examples of estimated accrued
research and development expenses include:
●
●
●
●
●
fees paid to CROs in connection with clinical studies;
fees paid to investigative sites in connection with clinical studies;
fees paid to vendors in connection with non-clinical development activities;
fees paid to vendors associated with the development of companion diagnostics; and
fees paid to vendors related to product manufacturing, development and distribution of clinical supplies.
We base our expenses related to clinical studies on our estimates of the services received and efforts expended pursuant to
contracts with multiple CROs that conduct and manage clinical studies on our behalf. The financial terms of these agreements are
subject to negotiation, vary from contract to contract and may result in uneven payment flows. There may be instances in which
payments made to our vendors will exceed the level of services provided and result in a prepayment of the clinical expense.
Payments under some of these contracts depend on factors such as the successful enrollment of patients and the completion of
clinical trial milestones. In accruing service fees, we estimate the time period over which services will be performed, enrollment
of patients, number of sites activated and the level of effort to be expended in each period. If the actual timing of the performance
of services or the level of effort varies from our estimate, we adjust the accrual or prepaid accordingly. Although we do not
expect our estimates to be materially different from amounts actually incurred, our understanding of the status and timing of
services performed relative to the actual status and timing of services performed may vary and may result in us reporting amounts
that are too high or too low in any particular period.
Share-Based Compensation
Determining the amount of share-based compensation to be recorded requires us to develop estimates of the fair value of stock
options as of their grant date. Compensation expense is recognized over the vesting period of the award. Calculating the fair
value of share-based awards requires that we make highly subjective assumptions. We use the Black-Scholes option pricing
model to value our stock option awards. Use of this valuation methodology requires that we make assumptions as to the expected
dividend yield, price volatility of our common stock, the risk-free interest rate for a period that approximates the expected term of
our stock options and the expected term of our stock options. We utilize a dividend yield of zero based on the fact that we have
never paid cash dividends and have no current intention to pay cash dividends.
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The fair value of stock options for the years ended December 31, 2020, 2019 and 2018 was estimated at the grant date using
the following weighted average assumptions for the respective periods:
Year Ended December 31,
Dividend yield
Volatility (a)
Risk-free interest rate (b)
Expected term (years) (c)
2020
—
99 %
2019
—
93 %
2018
—
88 %
0.49 % 1.67 % 2.92 %
5.9
6.0
5.9
(a) Volatility: The expected volatility was estimated using our historical data.
(b) Risk-free interest rate: The rate is based on the yield on the grant date of a zero-coupon U.S. Treasury bond whose maturity
period approximates the option’s expected term.
(c) Expected term: The expected term of the award was estimated using our historical data.
We recognized share-based compensation expense of approximately $50.8 million, $54.3 million and $49.1 million for the
years ended December 31, 2020, 2019 and 2018, respectively. As of December 31, 2020, the unrecognized share-based
compensation expense related to unvested options, adjusted for expected forfeitures, was $18.1 million, which is expected to be
recognized over a weighted-average remaining vesting period of 1.5 years. As of December 31, 2020, the unrecognized share-
based compensation expense related to RSUs, adjusted for expected forfeitures, was $33.6 million, which is expected to be
recognized over an estimated weighted-average remaining vesting period of 2.2 years. We expect our share-based compensation
to continue to grow in future periods due to the potential increases in the value of our common stock and headcount.
We estimate the level of forfeitures expected to occur and record compensation expense only for those awards that we
ultimately expect will vest.
Inventory
Inventories are stated at the lower of cost or estimated net realizable value, on a first-in, first-out (“FIFO”) basis. Inventories
include active pharmaceutical ingredient (“API”), contract manufacturing costs and overhead allocations. We begin capitalizing
incurred inventory related costs upon regulatory approval. Prior to regulatory approval, incurred costs for the manufacture of
drugs that could potentially be available to support the commercial launch of our products are recognized as research and
development expense.
We regularly analyze our inventory levels for excess quantities and obsolescence (expiration), considering factors such as
historical and anticipated future sales compared to quantities on hand and the remaining shelf-life of Rubraca. Rubraca finished
goods have a shelf-life of four years from the date of manufacture. We expect to sell the finished goods prior to expiration. The
API currently has a shelf-life of four years from the date of manufacture but can be retested at an immaterial cost with no
expected reduction in potency, thereby extending its shelf-life as needed. We expect to consume substantially all of the API over
a period of approximately seven years based on our long-range sales projections of Rubraca.
We write down inventory that has become obsolete, inventory that has a cost basis in excess of its estimated realizable value
and/or inventory in excess of expected sales requirements. Expired inventory would be disposed of and the related costs would be
written off as cost of product revenue. Inventories that are not expected to be consumed within 12 months following the balance
sheet date are classified as long-term inventories. Long-term inventories primarily consist of API.
API is currently produced by Lonza. As the API has undergone significant manufacturing specific to its intended purpose at
the point it is purchased by us, we classify the API as work-in-process inventory. In addition, we currently manufacture Rubraca
finished goods with a single third-party manufacturer. The disruption or termination of the supply of API or the disruption or
termination of the manufacturing of our commercial products could have a material adverse effect on our business, financial
position and results of operations. API that is written off due to damage and certain costs related to our dedicated production train
at Lonza are included in Other Operating Expenses in the Consolidated Statements of Operations and Comprehensive Loss.
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Inventory used in clinical trials is expensed as research and development expense when it has been identified for such use.
At December 31, 2020, we had $30.7 million of current inventory and $104.1 million of long-term inventory.
Intangible Assets
Definite-lived intangible assets related to capitalized milestones under license agreements are amortized on a straight-line
basis over their remaining useful lives, which are estimated to be the remaining patent life. If our estimate of the product’s useful
life is shorter than the remaining patent life, then a shorter period is used. Amortization expense is recorded as a component of
cost of sales in the Consolidated Statements of Operations and Comprehensive Loss.
Intangible assets are evaluated for impairment at least annually in the fourth quarter or more frequently if impairment
indicators exist. Events that could result in an impairment, or trigger an interim impairment assessment, include the decision to
discontinue the development of a drug, the receipt of additional clinical or nonclinical data regarding our drug candidate or a
potentially competitive drug candidate, changes in the clinical development program for a drug candidate, or new information
regarding potential sales for the drug. In connection with any impairment assessment, the fair value of the intangible assets as of
the date of assessment is compared to the carrying value of the intangible asset. Impairment losses are recognized if the carrying
value of an intangible asset is both not recoverable and exceeds its fair value.
Results of Operations
Comparison of the Year Ended December 31, 2020 to the Year Ended December 31, 2019 (in thousands)
Transaction price
Sales deductions:
Government rebates and chargebacks
Discounts and fees
Total sales deductions
Product revenue
Operating expenses:
External cost of sales - product
Cost of sales - intangible asset
amortization
Research and development
Selling, general and administrative
Acquired in-process research and
development
Other operating expenses
Total expenses
Operating loss
Other income (expense):
Interest expense
Foreign currency loss
(Loss) gain on extinguishment of debt
Loss on convertible senior notes
conversion
Legal settlement loss
Other income
Other income (expense), net
Loss before income taxes
Income tax benefit (expense)
Net loss
U.S.
$ 178,427
2020
ex-U.S.
$
36,035
Year ended December 31,
Total
$ 214,462
U.S.
$ 160,450
2019
ex-U.S.
$
7,867
$
(19,620)
(12,548)
(32,168)
146,259
(16,312)
(1,460)
(17,772)
18,263
(35,932)
(14,008)
(49,940)
164,522
(13,437)
(9,826)
(23,263)
137,187
(1,771)
(277)
(2,048)
5,819
Total
168,317
(15,208)
(10,103)
(25,311)
143,006
29,526
6,602
36,128
28,179
1,747
29,926
2,287
249,444
139,455
—
3,804
424,516
(278,257)
2,890
8,263
24,439
—
—
42,194
(23,931)
5,177
257,707
163,894
—
3,804
466,710
(302,188)
(30,508)
(72)
(3,277)
(35,075)
—
1,361
(67,571)
(369,759)
547
$ (369,212)
1,956
275,518
161,132
9,440
9,711
485,936
(348,749)
2,804
7,628
21,637
—
—
33,816
(27,997)
4,760
283,146
182,769
9,440
9,711
519,752
(376,746)
(19,405)
(547)
18,480
—
(26,750)
6,342
(21,880)
(398,626)
(1,798)
$ (400,424)
Product Revenue. Product revenue for the year ended December 31, 2020 increased compared to the same period in the prior
year primarily due to continued growth in sales of Rubraca, which is approved for sale in the United States and Europe markets.
Following successful reimbursement negotiations, Rubraca has been launched in countries in Europe throughout 2019 and 2020.
In May 2020, the FDA approved Rubraca as a monotherapy treatment of adult patients with BRCA1/2-mutant recurrent,
metastatic castrate-resistant prostate cancer and we have launched Rubraca for prostate
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cancer in the U.S. Product revenue is recorded net of variable considerations comprised of rebates, chargebacks and other
discounts. Product revenue for the year ended December 31, 2020 was $146.3 million in the United States and $18.2 million
outside of the United States. Variable considerations represented 23.3% and 15.0% of the transaction price recognized in the year
ended December 31, 2020 and 2019, respectively. The increase in variable considerations is primarily due to the European
National Health Service rebates related to our sales in Europe. Countries in Europe contract larger government rebates and
discounts compared to the U.S. contributing to the overall increase in variable considerations. As sales in Europe increase in
percentage terms compared to the U.S., variable considerations will also increase. In the United States, PHS chargebacks
increased during the year ended December 31, 2020 compared to the prior year. In addition, in the United States, GPO discounts
increased during the year ended December 31, 2020 and beginning in January 2020, we began providing payor rebates, which is
included in discounts and fees for the year ended December 31, 2020.
Cost of Sales - Product. Product cost of sales for the year ended December 31, 2020 increased primarily due to the increase in
product revenue. Product cost of sales primarily relate to manufacturing, freight and royalties costs associated with Rubraca sales
in the period.
U.S. product cost of sales for the year ended December 31, 2020 increased $1.3 million compared to the same period in the
prior year due to the increase in product revenue.
Ex-U.S. product cost of sales for the year ended December 31, 2020 increased $4.9 million compared to the same period in the
prior year due to the increase in product revenue.
Cost of Sales – Intangible Asset Amortization. For the year ended December 31, 2020 and 2019, we recognized cost of sales
of $5.2 million and $4.8 million, respectively, associated with the amortization of capitalized milestone payments related to the
approvals of Rubraca by the FDA and the European Commission.
Research and Development Expenses. Except for activities related to medical research and disease education, research and
development expenses are attributable to our U.S. segment. Research and development expenses decreased during the year ended
December 31, 2020 compared to the same period in the prior year primarily due to lower research and development costs for
Rubraca. The decrease related to our TRITON studies for prostate cancer, our ARIEL studies for ovarian cancer, discontinuation
of our ATLAS study, diagnostic development costs and personnel costs. These decreases were partially offset by increased costs
related to our ATHENA combination study with Bristol Myers Squibb’s immunotherapy OPDIVO for ovarian cancer. The
ATHENA study was initiated in the second quarter of 2018 and we completed target enrollment during the second quarter of
2020. In addition, research and development costs related to FAP and lucitanib have increased since the prior year.
Selling, General and Administrative Expenses. Selling, general and administrative expenses decreased during the year ended
December 31, 2020 compared to the same period in the prior year due to a decrease of $13.1 million in marketing costs and $3.2
million in share-based compensation expense. In addition, there was a decrease of $4.0 million in travel due to the COVID-19
pandemic.
U.S. selling, general and administrative expenses decreased $21.7 million during the year ended December 31, 2020 compared
to the same period in the prior year due to decreases in marketing costs, share-based compensation expense and a decrease in
travel due to the COVID-19 pandemic.
Ex-U.S. selling, general and administrative expenses increased $2.8 million during the year ended December 31, 2020
compared to the same period in the prior year due to the commercial activities related to the Rubraca launches in European
countries during 2020.
Acquired In-Process Research and Development Expenses. Upon the signing of the license and collaboration agreement with
3BP in September 2019, we made a $9.4 million upfront payment to 3BP, which is related to our U.S. segment.
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Other Operating Expenses. During the year ended December 31, 2020, we recognized other operating expenses related to the
write off of some damaged API and certain costs related to our dedicated production train at Lonza, which is related to our U.S.
segment. We expect these expenses to increase during 2021 related to our fixed facility fee each quarter since we expect to have
sufficient inventory and do not plan to produce inventory at Lonza during 2021.
Interest Expense. Interest expense increased during the year ended December 31, 2020 compared to the same period in the
prior year due to the May 2019 financing agreement related to our ATHENA trial. In addition, our convertible senior notes
transactions during the year resulted in the write off of $4.3 million of unamortized debt issuance costs, which was recorded as
interest expense.
Loss/Gain on Extinguishment of Debt. In April 2020, we entered into a privately negotiated exchange agreement with a
Holder of our 2021 Notes, pursuant to which we issued to such Holder of the 2021 Notes approximately $36.1 million in
additional 2024 Notes (2019 Issuance) of our currently outstanding 2024 Notes (2019 Issuance) in exchange for approximately
$32.8 million in aggregate principal of 2021 Notes held by such Holder, which resulted in a $3.3 million loss on extinguishment
of debt.
In August 2019, we repurchased $190.3 million aggregate principal amount of our outstanding 2021 Notes and $2.0 million of
accrued interest for an aggregate repurchase price of $171.8 million. This repurchase resulted in the write off of $2.0 million in
unamortized debt issuance costs and the recognition of $18.5 million gain on extinguishment of debt.
Loss on Convertible Senior Notes Conversion. In January 2020, we completed a registered direct offering of an aggregate
17,777,679 shares of our common stock at a price of $9.25 per share. We used the proceeds of the share offering to repurchase an
aggregate of $123.4 million principal amount of 2024 Notes (2019 Issuance) in privately negotiated transactions. In addition, we
paid customary fees and expenses in connection with the transactions. These transactions resulted in a loss of $7.8 million for the
year ended December 31, 2020.
In November 2020, we entered into a privately negotiated exchange and purchase agreement with a holder of our 2024 Notes
(2019 Issuance). Pursuant to the agreement, in exchange for approximately $64.8 million aggregate principal amount of 2024
Notes (2019 Issuance) held by the holder, we agreed to issue to the holder a number shares of our common stock (the
“Exchanged Shares”) utilizing an exchange ratio that is based in part on the daily volume-weighted average prices (“VWAPs”)
per share of our common stock during a seven-day pricing period following execution of the agreement.
The number of Exchanged Shares was calculated utilizing an exchange ratio that is based in part on the average VWAPs of
our common stock (subject to a floor) during a seven-day pricing period beginning on November 5, 2020 and ending on, and
including, November 13, 2020. In November 2020, we issued 15,112,848 Exchanged Shares pursuant to the debt exchange
transaction. As a result, we recognized a $27.3 million loss on the transactions.
Legal Settlement Loss. During the second quarter of 2019, we recorded a charge of $26.8 million to settle a complaint filed by
Antipodean Domestic Partners.
Other Income. Other income decreased during the year ended December 30, 2020 due to interest income earned on our
available-for-sale securities. We did not have available-for-sale securities starting with the quarter ended June 30, 2020 through
December 31, 2020.
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Comparison of the Year Ended December 31, 2019 to the Year Ended December 31, 2018 (in thousands)
Transaction price
Sales deductions:
Government rebates and chargebacks
Discounts and fees
Total sales deductions
Product revenue
Operating expenses:
Cost of sales - product
Cost of sales - intangible asset
amortization
Research and development
Selling, general and administrative
Acquired in-process research and
development
Other operating expenses
Total expenses
Operating loss
Other income (expense):
Interest expense
Foreign currency loss
Gain on extinguishment of debt
Legal settlement loss
Other income
Other income (expense), net
Loss before income taxes
Income tax benefit (expense)
Net loss
U.S.
$ 160,450
2019
ex-U.S.
$
7,867
Year ended December 31,
Total
$ 168,317
U.S.
$ 106,479
2018
ex-U.S.
$
— $
Total
106,479
(13,437)
(9,826)
(23,263)
137,187
(1,771)
(277)
(2,048)
5,819
(15,208)
(10,103)
(25,311)
143,006
(6,379)
(4,712)
(11,091)
95,388
—
—
—
—
(11,091)
95,388
28,179
1,747
29,926
19,444
—
19,444
1,956
275,518
161,132
9,440
9,711
485,936
(348,749)
2,804
7,628
21,637
—
—
33,816
(27,997)
4,760
283,146
182,769
9,440
9,711
519,752
(376,746)
1,954
226,925
161,743
—
—
676
4,422
14,038
—
—
410,066
(314,678)
19,136
(19,136)
(19,405)
(547)
18,480
(26,750)
6,342
(21,880)
(398,626)
(1,798)
$ (400,424)
2,630
231,347
175,781
—
—
429,202
(333,814)
(13,183)
(346)
—
(27,975)
7,917
(33,587)
(367,401)
(608)
$ (368,009)
Product Revenue. Product revenue for the year ended December 31, 2019 increased primarily due to continued growth in
sales of Rubraca, which is approved for sale in the United States and Europe markets. We completed our launch of Rubraca as
maintenance therapy in Germany and the UK in March 2019. Product revenue is recorded net of variable considerations
comprised of rebates, chargebacks and other discounts. Product revenue for the year ended December 31, 2019 was $137.2
million in the United States and $5.8 million outside of the United States. Variable considerations represented 15.0% and 10.4%
of the transaction price recognized in the year ended December 31, 2019 and 2018, respectively. This increase is primarily due to
government and group purchasing organization rebates; in addition, our launch in Germany and the UK in March 2019
contributed to the increase.
U.S. product revenue for the year ended December 31, 2019 increased $41.8 million compared to the same period in the prior
year due to continued growth in sales of Rubraca.
Ex-U.S. product revenue for the year ended December 31, 2019 increased $5.8 million compared to the same period in the
prior year due to our launch of Rubraca as maintenance therapy in Germany and the UK in March 2019.
Cost of Sales - Product. Product cost of sales for the year ended December 31, 2019 increased due to the increase in product
revenue. Product cost of sales primarily relate to manufacturing, freight and royalties costs associated with Rubraca sales in the
period.
U.S. product cost of sales for the year ended December 31, 2019 increased $8.7 million compared to the same period in the
prior year due to the increase in product revenue.
Ex-U.S. product cost of sales for the year ended December 31, 2019 increased $1.7 million compared to the same period in the
prior year due to the increase in product revenue.
Cost of Sales – Intangible Asset Amortization. For the year ended December 31, 2019 and 2018, we recognized cost of sales
of $4.8 million and $2.6 million, respectively, associated with the amortization of capitalized milestone payments related to the
approvals of Rubraca by the FDA and the European Commission.
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Research and Development Expenses. Except for activities related to medical research and disease education, research and
development expenses are attributable to our U.S. segment. Research and development expenses increased during the year ended
December 31, 2019 due to higher research and development costs for Rubraca. Clinical trial costs for Rubraca were higher
compared to the same period a year ago due to increased enrollment in our TRITON3 study for prostate cancer. We have
increased costs related to our new ATLAS study for bladder cancer and our ATHENA combination study with Bristol Myers
Squibb Company’s immunotherapy OPDIVO for ovarian cancer. Since our ATLAS study for bladder cancer was discontinued in
April 2019, costs for this study decreased during the remainder of 2019. In addition, personnel costs increased during the year
ended December 31, 2019 due to higher headcount to support increased Rubraca clinical trial activities.
Clinical trial costs for lucitanib were $4.3 million higher than the year ended December 31, 2018 primarily due to increase
enrollment in our Phase 1b/2 studies. In addition, we incurred $3.6 million for FAP-2286 as we have begun to pursue a clinical
development program in multiple tumor types.
Selling, General and Administrative Expenses. Selling, general and administrative expenses increased during the year ended
December 31, 2019 primarily due to increased commercialization activities for Rubraca and the increase of costs associated with
building out the European infrastructure for commercialization which began in March 2019. This includes an increase of $4.3
million in personnel costs and $3.6 million in marketing costs. These increases were primarily related to our ex-U.S. segment.
Acquired In-Process Research and Development Expenses. Upon the signing of the license and collaboration agreement with
3BP in September 2019, we made a $9.4 million upfront payment to 3BP, which is related to our U.S. segment.
Other Operating Expenses. During the year ended December 31, 2019, we recognized other operating expenses related to the
write off of some damaged API and certain costs related to our dedicated production train at Lonza, which is related to our U.S.
segment.
Interest Expense. Interest expense increased during the year ended December 31, 2019 due to the issuance of the 2025 Notes
in April 2018 and the 2024 Notes in August 2019.
Legal Settlement Loss. During the second quarter of 2019, we recorded a charge of $26.8 million to settle a complaint filed by
Antipodean Domestic Partners (the “Antipodean Complaint”). During the first quarter of 2018, we recorded a charge of $8.0
million related to an agreement to resolve a potential litigation claim against us and our officers. We also recorded a charge of
$20.0 million related to an agreement reached with the SEC to resolve its investigation.
Gain on Extinguishment of Debt. In August 2019, we repurchased $190.3 million principal amount of the outstanding 2021
Notes and $2.0 million of accrued interest for an aggregate repurchase price of $171.8 million. This repurchase resulted in the
write off of $2.0 million in unamortized debt issuance costs and the recognition of $18.5 million gain on extinguishment of debt.
Other Income. Other income decreased during the year ended December 31, 2019 due to interest income earned on our
available-for-sale securities.
Liquidity and Capital Resources
To date, we have principally funded our operations using the net proceeds from public offerings of our common stock,
convertible senior notes offerings and our financing agreement related to our ATHENA trial.
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The following table sets forth the primary sources and uses of cash for each of the periods set forth below:
Net cash used in operating activities
Net cash provided by (used in) investing activities
Net cash provided by financing activities
Effect of exchange rate changes on cash and cash equivalents
Net increase (decrease) in cash and cash equivalents
Operating Activities
2020
2018
Year Ended December 31,
2019
(in thousands)
$ (252,728) $ (323,615) $ (365,997)
(264,242)
143,398
388,464
119,888
(547)
286
$ (60,043) $ (242,322)
126,328
203,644
1,152
78,396
$
Net cash used in operating activities resulted primarily from our net losses adjusted for non-cash items and changes in
components of working capital. Net cash used in operating activities was lower during the year ended December 31, 2020
compared to the same period in the prior year primarily due to a lower net loss, as adjusted for non-cash items related to our debt
transactions. In addition, there was a reduction in payments made for inventory during the period partially offset by payments
made for prepaid and accrued research and development expenses.
Net cash used in operating activities resulted primarily from our net losses adjusted for non-cash items and changes in
components of working capital. Net cash used in operating activities was lower during the year ended December 31, 2019
compared to prior year primarily due to higher amounts paid for inventory during the year ended December 31, 2018, partially
offset by a higher net loss as adjusted for non-cash items primarily due to legal settlement loss and gain on extinguishment of
debt.
Investing Activities
Net cash provided by investing activities for the year ended December 31, 2020 included sales of available-for-sale securities
of $144.6 million, partially offset by purchases of available-for-sale securities of $10.0 million and a milestone payment of $8.0
million.
Net cash provided by investing activities for the year ended December 31, 2019 included sales of available-for-sale securities
of $622.0 million partially offset by purchases of available-for-sale securities of $459.8 million and milestone payments of $15.8
million.
Financing Activities
Net cash provided by financing activities for the year ended December 31, 2020 included proceeds of $246.7 million from the
issuance of common stock, proceeds of $56.6 million from the issuance of our 2024 Notes (2020 Issuance), partially offset by a
$164.4 million payment of our 2024 Notes. In addition, we had $65.1 million proceeds from borrowings under our financing
agreement.
Net cash provided by financing activities for the year ended December 31, 2019 included proceeds of $254.9 million from the
issuance of our 2024 Notes (2019 Issuance), $32.9 million proceeds from borrowings under our financing agreement and $3.3
million received from employee stock option exercises and issuance of stock under the employee stock purchase plan, partially
offset by the $170.0 million extinguishment of a portion of our 2021 Notes.
Operating Capital Requirements
Rubraca is approved in the United States and Europe for multiple indications. We expect to incur significant losses for the
foreseeable future, as we commercialize Rubraca and as we complete research and development activities related to FAP-2286
and lucitanib.
As of December 31, 2020, we had cash and cash equivalents totaling $240.2 million and total current liabilities of $184.9
million.
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Because of the numerous risks and uncertainties associated with research, development and commercialization of
pharmaceutical products, we are unable to estimate the exact amounts of our working capital requirements. Our future funding
requirements will depend on many factors, including but not limited to:
●
●
●
●
●
●
●
●
the number and characteristics of the product candidates, companion diagnostics and indications we pursue;
the achievement of various development, regulatory and commercial milestones resulting in required payments to
partners pursuant to the terms of our license agreements;
the scope, progress, results and costs of researching and developing our product candidates and related companion
diagnostics and conducting clinical and non-clinical trials;
the timing of, and the costs involved in, obtaining regulatory approvals for our product candidates and companion
diagnostics;
the cost of commercialization activities, including marketing and distribution costs;
the cost of manufacturing any of our product candidates we successfully commercialize;
the costs involved in preparing, filing, prosecuting, maintaining, defending and enforcing patent claims, including
litigation costs and outcome of such litigation; and
the timing, receipt and amount of sales, if any, of our products.
Contractual Obligations and Commitments
The following table summarizes our contractual obligations at December 31, 2020 (in thousands):
Convertible senior notes
Interest on convertible senior notes
Financing agreement (principal and interest)
Operating lease commitments
Finance lease commitments
Purchase and other commitments (a)
Total
Less than 1
Year
$ 64,418
11,338
—
5,796
2,287
13,616
$ 97,455
1 to 3 Years
$
3 to 5 Years
— $ 443,282
8,789
94,259
9,893
4,574
27,232
$ 588,029
20,396
50,025
10,167
4,574
27,232
$ 112,394
More Than 5
Years
Total
$
$
— $ 507,700
40,523
—
199,511
35,794
11,435
68,080
$ 863,043
55,227
9,938
—
—
65,165
(a) On October 3, 2016, we entered into a Manufacturing and Services Agreement (the “Agreement”) with a non-exclusive
third-party supplier for the production of the active ingredient for Rubraca. Under the terms of the Agreement, we will
provide the third-party supplier a rolling forecast for the supply of the active ingredient in Rubraca that will be updated by us
on a quarterly basis. We are obligated to order material sufficient to satisfy an initial quantity specified in any forecast. In
addition, the third-party supplier constructed, in its existing facility, a production train that is exclusively dedicated to the
manufacture of the Rubraca active ingredient. We are obligated to make scheduled capital program fee payments toward
capital equipment and other costs associated with the construction of the dedicated production train. Once the facility
became operational in October 2018, we are obligated to pay a fixed facility fee each quarter for the duration of the
Agreement, which expires on December 31, 2025, unless extended by mutual consent of the parties.
Royalty and License Fee Commitments
Rubraca. We have certain obligations under licensing agreements with third parties contingent upon achieving various
development, regulatory and commercial milestones. On August 30, 2016, we entered into a first amendment to the worldwide
license agreement with Pfizer, which amends the June 2011 existing worldwide license agreement to permit us to defer payment
of the milestone payments payable upon (i) FDA approval of an NDA for 1st Indication in US and (ii) European Commission
approval of an MAA for 1st Indication in the EU, to a date that is 18 months after the date of achievement of such milestones.
On December 19, 2016, Rubraca received its initial FDA approval. This approval resulted in a $0.75 million milestone
payment to Pfizer as required by the license agreement, which was paid in the first quarter of 2017. This FDA approval also
resulted in an obligation to pay a $20.0 million milestone payment, for which we exercised the option to defer payment by
agreeing to pay $23.0 million within 18 months after the date of the FDA approval. We paid the $23.0 million milestone payment
in June 2018.
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In April 2018, Rubraca received a second FDA approval. This approval resulted in an obligation to pay a $15.0 million
milestone payment, which we paid in April 2018.
In May 2018, Rubraca received its initial European Commission marketing authorization. This approval resulted in an
obligation to pay a $20.0 million milestone payment, which we paid in June 2018.
In January 2019, Rubraca received a second European Commission approval. This approval resulted in an obligation to pay a
$15.0 million milestone payment, which we paid in February 2019.
In June 2019, we paid a $0.75 million milestone payment due to the launch of Rubraca as maintenance therapy in Germany in
March 2019.
In May 2020, Rubraca received a third FDA approval for Rubraca as a monotherapy treatment of adult patients with
BRCA1/2-mutant recurrent, metastatic castrate-resistant prostate cancer. This approval resulted in an obligation to pay an $8.0
million milestone payment, which we paid in June 2020.
These milestone payments were recognized as intangible assets and are amortized over the estimated remaining useful life of
Rubraca.
We are obligated under the license agreement to use commercially reasonable efforts to develop and commercialize Rubraca
and we are responsible for all ongoing development and commercialization costs for Rubraca. We are required to make
regulatory milestone payments to Pfizer of up to an additional $8.0 million in aggregate if specified clinical study objectives and
regulatory filings, acceptances and approvals are achieved. In addition, we are obligated to make sales milestone payments to
Pfizer if specified annual sales targets for Rubraca are met, which relate to annual sales targets of $250.0 million and above,
which, in the aggregate, could amount to total milestone payments of $170.0 million, and tiered royalty payments at a mid-teen
percentage rate on net sales, with standard provisions for royalty offsets to the extent we need to obtain any rights from third
parties to commercialize Rubraca.
Lucitanib. On November 19, 2013, we acquired all of the issued and outstanding capital stock of EOS pursuant to the terms
set forth in that certain Stock Purchase Agreement, dated as of November 19, 2013 (the “Stock Purchase Agreement”), by and
among the Company, EOS, its shareholders (the “Sellers”) and Sofinnova Capital V FCPR, acting in its capacity as the Sellers’
representative. Following the acquisition, EOS became a wholly-owned subsidiary of the Company. Under the terms of the Stock
Purchase Agreement, in addition to the initial purchase price paid at the time of the closing of the acquisition and other license
fees due to Advenchen described below, we will also be obligated to pay to the Sellers a milestone payment of $65.0 million
upon obtaining the first NDA approval from the FDA with respect to lucitanib.
In October 2008, Ethical Oncology Science, S.p.A. (“EOS”) (now known as Clovis Oncology Italy S.r.l.) entered into an
exclusive license agreement with Advenchen Laboratories LLC (“Advenchen”) to develop and commercialize lucitanib on a
global basis, excluding China.
We are obligated to pay Advenchen tiered royalties at percentage rates in the mid-single digits on net sales of lucitanib, based
on the volume of annual net sales achieved. In addition, after giving effect to the first and second amendments to the license
agreement, we are required to pay to Advenchen 25% of any consideration, excluding royalties, we receive from sublicensees, in
lieu of the milestone obligations set forth in the agreement. We are obligated under the agreement to use commercially reasonable
efforts to develop and commercialize at least one product containing lucitanib, and we are also responsible for all remaining
development and commercialization costs for lucitanib.
The license agreement with Advenchen will remain in effect until the expiration of all of our royalty obligations to
Advenchen, determined on a product-by-product and country-by-country basis, unless we elect to terminate the agreement
earlier. If we fail to meet our obligations under the agreement and are unable to cure such failure within specified time periods,
Advenchen can terminate the agreement, resulting in a loss of our rights to lucitanib.
FAP. In September 2019, we entered into a global license and collaboration agreement with 3BP to develop and
commercialize a PTRT and imaging agent targeting FAP. The lead candidate, designated internally as FAP-2286, is being
developed pursuant to a global development plan agreed to by the parties. We are responsible for the costs of all
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preclinical and clinical development activities described in the plan, including the costs for a limited number of 3BP full-time
equivalents and external costs incurred during the preclinical development phase of the collaboration. Upon the signing of the
license and collaboration agreement in September 2019, we made a $9.4 million upfront payment to 3BP, which we recognized
as acquired in-process research and development expense.
Pursuant to the terms of the FAP agreement, we are required to make additional payments to 3BP for annual technology
access fees and upon the achievement of certain development and regulatory milestone events (or on certain dates, whichever
occur earlier). We are also obligated to pay 3BP single- to low-double-digit royalties on net sales of the FAP-targeted therapeutic
product and imaging agent, based on the volume of annual net sales achieved. In addition, 3BP is entitled to receive 34% of any
consideration, excluding royalties on the therapeutic product, pursuant to any sublicenses we may grant.
We are obligated under the license and collaboration agreement to use diligent efforts to develop FAP-2286 and
commercialize a FAP-targeted therapeutic product and imaging agent, and we are responsible for all commercialization costs in
our territory. The agreement with 3BP will remain in effect until the expiration of our royalty obligations to 3BP, determined on a
product-by-product and country-by-country basis, unless we elect to terminate the agreement earlier. If we fail to meet our
obligations under the agreement and are unable to cure such failure within specified time periods, 3BP can terminate the
agreement, resulting in a loss of our rights. 3BP also has the right to terminate the agreement under certain circumstances in
connection with our change of control in which the acquiring party retains a product competitive with the FAP-targeted
therapeutic product or, in the event marketing authorization has not yet been obtained, does not agree to the then-current global
development plan.
In February 2020, we finalized the terms of a drug discovery collaboration agreement with 3BP to identify up to three
additional, undisclosed targets for peptide-targeted radionuclide therapy, to which we will obtain global rights for any resulting
product candidates. We are responsible for the costs of all preclinical and clinical development activities conducted under the
discovery program, including the costs for a limited number of 3BP full-time equivalents and external costs incurred during the
discovery and preclinical development phase for each collaboration target. The agreement was effective December 31, 2019, for
which we incurred a $2.1 million technology access fee, which we accrued and recognized as a research and development
expense.
Pursuant to the terms of the discovery collaboration agreement, we are required to make additional payments to 3BP for
annual technology access fees and upon the achievement of certain development and regulatory milestone events (or on certain
dates, whichever occur earlier). We are also obligated to pay 3BP a 6% royalty on net sales of License Products (as defined in the
agreement), based on the volume of quarterly net sales achieved.
We are obligated under the discovery collaboration agreement to use diligent efforts to develop and commercialize the product
candidates, if any, that result from the discovery program, and we are responsible for all clinical development and
commercialization costs. The agreement with 3BP will remain in effect until the expiration of our royalty obligations to 3BP,
determined on a product-by-product and country-by-country basis, unless we elect to terminate the agreement earlier. If we fail to
meet our obligations under the agreement and are unable to cure such failure within specified time periods, 3BP can terminate the
agreement, resulting in a loss of our rights.
Impact of COVID-19 Pandemic
Our ability to generate product revenue for the year ended December 31, 2020 was negatively affected by the COVID-19
pandemic due to fewer diagnoses and fewer patients going to in-person office visits as oncology practices and patients continue
to adapt to the impact of the virus. As a result of the COVID-19 pandemic, our U.S. and European sales forces have had physical
access to hospitals, clinics, doctors and pharmacies curtailed and/or have been limited. Our European launches in Italy, Spain and
France occurred in an environment in which our field-based personnel in those countries have not been allowed to visit hospitals
since as early as late February. Similarly, we launched Rubraca for prostate cancer in the U.S. beginning in May 2020, but our
physical access to hospitals, clinics, doctors and pharmacies has been limited. It is difficult to discern or predict any trend in new
patient starts due to the unpredictability of the COVID-19 situation and the changing competitive landscape.
This curtailment of and/or limited physical access has decreased sales and marketing expenses during 2020 and will likely
extend to 2021. In addition, due to increased travel restrictions, quarantines, “work-at-home” and “shelter-in-place” orders and
extended shutdown of certain non-essential business in the United States, and European and Asia-
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Pacific countries, in-person conferences and meetings requiring travel will decrease, resulting in a decrease of our selling, general
and administrative expenses. We believe that we have sufficient supply of Rubraca and our product candidates to continue our
commercial and clinical operations as planned.
The COVID-19 pandemic has accelerated a preference by oncology practices for more digital programming, including digital,
peer-to-peer interactions and reduced in-person promotion. In order to meet these changing preferences, we are adopting a hybrid
commercial strategy combining increased digital promotion activities, greater online resources and more peer-to-peer interactions
with reduced and more targeted in-person promotion. Accordingly, new tools and performance indicators based on this hybrid
approach were rolled out beginning in the fourth quarter, and the U.S. commercial organization was reduced in size by
approximately 45 employees. Despite increased investment in digital promotion, we anticipate an effect of adopting this hybrid
model will result in annual cost-savings of approximately $10.0 million. We are adopting this strategy in order to better reach
customers in the way they want to be reached with the goal of returning to growth, especially as the ongoing impact of COVID-
19 is reduced.
We did not see material disruption to our clinical trials as a result of the COVID-19 pandemic for the year ended December
31, 2020 as we completed target enrollment of ATHENA, our largest clinical trial, during the second quarter. However, we may
see disruption during 2021. For example, new patient recruitment in certain clinical studies may be affected and the conduct of
clinical trials may vary by geography as some regions are more adversely affected. Additionally, we may slow or delay
enrollment in certain trials to manage expenses.
On March 18, 2020, the Families First Coronavirus Response Act (“FFCR Act”), and on March 27, 2020, the Coronavirus
Aid, Relief and Economic Security (“CARES”) Act were each enacted in response to the COVID-19 pandemic. The FFCR Act
and the CARES Act contain numerous income tax provisions, such as relaxing limitations on the deductibility of interest and the
use of net operating losses arising in taxable years beginning after December 31, 2017. We evaluated the impact of this
legislation and the income tax provisions did not result in a material cash benefit to us. Future regulatory guidance under the
FFCR Act and the CARES Act (as well as under the Tax Cuts and Jobs Act) remains forthcoming, and such guidance could
ultimately increase or lessen their impact on our business and financial condition. It is also highly possible that Congress will
enact additional legislation in connection with the COVID-19 pandemic, some of which could impact us.
The trading prices for our common stock and of other biopharmaceutical companies have been highly volatile as a result of the
coronavirus pandemic. As a result of this volatility and uncertainties regarding future impact of COVID-19 on our business and
operations, we may face difficulties raising capital or may only be able to raise capital on unfavorable terms.
Off-Balance Sheet Arrangements
We did not have during the periods presented, and we do not currently have, any off-balance sheet arrangements, as defined
under the rules promulgated by the U.S. Securities and Exchange Commission.
Tax Loss Carryforwards
As of December 31, 2020, we have net operating loss (“NOL”) carryforwards of approximately $1.7 billion to offset future
federal income taxes. We also have research and development and orphan drug tax credit carryforwards of $254.5 million to
offset future federal income taxes. The federal net operating loss carryforwards and research and development and orphan drug
tax credit carryforwards expire at various times through 2040.
We believe that a change in ownership as defined under Section 382 of the U.S. Internal Revenue Code occurred as a result of
our public offering of common stock completed in April 2012. Future utilization of the federal net operating losses and tax credit
carryforwards accumulated from inception to the change in ownership date will be subject to annual limitations to offset future
taxable income. It is possible that a change in ownership will occur in the future, which will limit the NOL amounts generated
since the last estimated change in ownership. At December 31, 2020, we recorded a 100% valuation allowance against our net
deferred tax assets in the U.S. of $801.5 million, as we believe it is more likely than not that the tax benefits will not be fully
realized. In the future, if we determine that a portion or all of the tax benefits associated with our tax carryforwards will be
realized, net income would increase in the period of determination.
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Recently Adopted and Issued Accounting Standards
For a discussion of recently adopted and issued accounting standards, see Note 2, Summary of Significant Accounting Policies,
in the Notes to Consolidated Financial Statements included in Part II, Item 8, Financial Statements and Supplementary Data, of
this Annual Report on Form 10-K.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to market risk related to changes in interest rates. As of December 31, 2020, we had cash, cash equivalents of
$240.2 million, consisting of bank demand deposits and money market funds. The primary objectives of our investment policy
are to preserve principal and maintain proper liquidity to meet operating needs. Our investment policy specifies credit quality
standards for our investments and limits the amount of credit exposure to any single issue, issuer or type of investment. Our
primary exposure to market risk is interest rate sensitivity, which is affected by changes in the general level of U.S. interest rates,
particularly because our investments are in short-term securities. Our available-for-sale securities are subject to interest rate risk
and will decline in value if market interest rates increase. Due to the short-term duration of our investment portfolio and the low
risk profile of our investments, an immediate 100 basis point change in interest rates would not have a material effect on the fair
value of our portfolio.
We contract with contract research organizations, investigational sites and contract manufacturers globally where payments
are made in currencies other than the U.S. dollar. In addition, on October 3, 2016, we entered into a Manufacturing and Services
Agreement with a Swiss company for the production and supply of the active ingredient for Rubraca. Under the terms of this
agreement, payments for the supply of the active ingredient in Rubraca as well as scheduled capital program fee payment toward
capital equipment and other costs associated with the construction of a dedicated production train will be made in Swiss francs.
Once the production facility became operational in October 2018, we are obligated to pay a fixed facility fee each quarter for the
duration of the agreement, which expires on December 31, 2025.
As of December 31, 2020, $68.1 million of purchase commitments exist under the Swiss Manufacturing and Services
Agreement and we are required to remit amounts due in Swiss francs. Due to other variables that may exist, it is difficult to
quantify the impact of a particular change in exchange rates. However, we estimate that if the value of the US dollar was to
strengthen by 10% compared to the value of Swiss franc as of December 31, 2020, it would decrease the total US dollar purchase
commitment under the Swiss Manufacturing and Services Agreement by approximately $20.0 million. Similarly, a 10%
weakening of the US dollar compared to the Swiss franc would increase the total US dollar purchase commitment by
approximately $9.3 million.
While we periodically hold foreign currencies, primarily Euro, Pound Sterling and Swiss Franc, we do not use other financial
instruments to hedge our foreign exchange risk. Transactions denominated in currencies other than the functional currency are
recorded based on exchange rates at the time such transactions arise. As of December 31, 2020, and 2019, approximately 3% and
4%, respectively, of our total liabilities were denominated in currencies other than the functional currency.
ITEM 8.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements required by this Item are included in Item 15 of this report and are presented beginning on page F-1.
ITEM 9.
None.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
ITEM 9A. CONTROLS AND PROCEDURES
Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures
Our disclosure controls and procedures are designed to ensure that information required to be disclosed in the reports we file
or submit under the Securities Exchange Act of 1934, as amended (“Exchange Act”) is recorded, processed,
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summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and
that such information is accumulated and communicated to our management, including the Chief Executive Officer and the
Principal Financial and Accounting Officer, to allow timely decisions regarding required disclosures. Any controls and
procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control
objective.
As of December 31, 2020, our management, with the participation of our Chief Executive Officer and Chief Finance Officer,
performed an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as defined in
Rules 13a-15(e) and 15d-15(e) of the Exchange Act. Based on this evaluation, our Chief Executive Officer and Chief Finance
Officer concluded that, as of December 31, 2020, the design and operation of our disclosure controls and procedures were
effective at the reasonable assurance level.
Management’s Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining effective internal control over financial reporting and for the
assessment of the effectiveness of internal control over financial reporting. Internal control over financial reporting is a process
designed by, or under the supervision of, a company’s principal executive officer and principal financial officer and affected by
our board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting
principles. Our internal control over financial reporting includes those policies and procedures that:
●
●
●
pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and
dispositions of our assets;
provide reasonable assurance that transactions are recorded as necessary to permit preparation of the consolidated
financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures
are being made only in accordance with authorizations of our management and directors; and
provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of
our assets that could have a material effect on the consolidated financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions or the degree of compliance with the policies or procedures may deteriorate.
As of December 31, 2020, our management, with the participation of our Chief Executive Officer and Chief Finance Officer,
assessed the effectiveness of our internal control over financial reporting as defined in Rules 13a-15(f) or 15d-15(f) of the
Exchange Act. In making its assessment, management used the criteria established in Internal Control—Integrated Framework
(2013 framework) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on its assessment,
our management determined that, as of December 31, 2020, we maintained effective internal control over financial reporting
based on those criteria.
In addition, the effectiveness of our internal control over financial reporting as of December 31, 2020 has been audited by
Ernst & Young, LLP, an independent registered public accounting firm.
Changes in Internal Control Over Financial Reporting
There were no changes in our internal controls over financial reporting during the quarter ended December 31, 2020 that have
materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.
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Report of Independent Registered Public Accounting Firm
To the Stockholders and the Board of Directors of Clovis Oncology, Inc.
Opinion on Internal Control Over Financial Reporting
We have audited Clovis Oncology, Inc.’s internal control over financial reporting as of December 31, 2020, based on criteria
established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission (2013 framework) (the COSO criteria). In our opinion, Clovis Oncology, Inc. (the Company) maintained, in all
material respects, effective internal control over financial reporting as of December 31, 2020, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(PCAOB), the consolidated balance sheets of the Company, as of December 31, 2020 and 2019, the related consolidated
statements of operations and comprehensive loss, stockholders’ equity (deficit), and cash flows for each of the three years in the
period ended December 31, 2020, and the related notes and our report dated February 24, 2021 expressed an unqualified opinion
thereon.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its
assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report
on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over
financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be
independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and
regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all
material respects.
Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material
weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and
performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a
reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that
(1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions
of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of
financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the
company are being made only in accordance with authorizations of management and directors of the company; and (3) provide
reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s
assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ Ernst & Young LLP
Denver, Colorado
February 24, 2021
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ITEM 9B. OTHER INFORMATION
None.
PART III
Certain information required by Part III is omitted from this Annual Report on Form 10-K and is incorporated herein by
reference from our definitive proxy statement relating to our 2020 annual meeting of stockholders, pursuant to Regulation 14A of
the Securities Exchange Act of 1934, as amended, also referred to in this Form 10-K as our 2020 Proxy Statement, which we
expect to file with the SEC no later than April 30, 2021.
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Information regarding our directors, including the audit committee and audit committee financial experts, and executive
officers and compliance with Section 16(a) of the Exchange Act will be included in our 2020 Proxy Statement and is
incorporated herein by reference.
We have adopted a Code of Business Ethics for all of our directors, officers and employees as required by NASDAQ
governance rules and as defined by applicable SEC rules. Stockholders may locate a copy of our Code of Business Ethics on our
website at www.clovisoncology.com or request a copy without charge from:
Clovis Oncology, Inc.
Attention: Investor Relations
5500 Flatiron Parkway, Suite 100
Boulder, CO 80301
We will post to our website any amendments to the Code of Business Ethics and any waivers that are required to be disclosed
by the rules of either the SEC or NASDAQ.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item regarding executive compensation will be included in our 2021 Proxy Statement and is
incorporated herein by reference.
ITEM 12.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS
The information required by this item regarding security ownership of certain beneficial owners and management will be
included in the 2021 Proxy Statement and is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE
The information required by this item regarding certain relationships and related transactions and director independence will
be included in the 2021 Proxy Statement and is incorporated herein by reference.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
The information required by this item regarding principal accounting fees and services will be included in the 2021 Proxy
Statement and is incorporated herein by reference.
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PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) The following documents are being filed as part of this report:
(1) Financial Statements.
Reference is made to the Index to Financial Statements of Clovis Oncology, Inc. appearing on page F-1 of this report.
(2) Financial Statement Schedules.
All financial statement schedules have been omitted because they are not applicable or not required or because the
information is included elsewhere in the Financial Statements or the Notes thereto.
(3) Exhibits.
Reference is made to the Index to Exhibits filed as a part of this Annual Report on Form 10-K.
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Exhibit
Number
INDEX TO EXHIBITS
Exhibit Description
3.1(5)
Amended and Restated Certificate of Incorporation of Clovis Oncology, Inc.
3.2(19)
Certificate of Amendment to Amended and Restated Certificate of Incorporation of Clovis Oncology, Inc.
3.3(5)
Amended and Restated Bylaws of Clovis Oncology, Inc.
3.4(22)
Amendment No. 1 to the Amended and Restated Bylaws of Clovis Oncology, Inc.
4.1(3)
Form of Common Stock Certificate of Clovis Oncology, Inc.
4.2(7)
4.3(14)
4.4(14)
4.5(20)
4.6(21)
4.7(26)
Indenture, dated as of September 9, 2014, by and between the Company and The Bank of New York Mellon Trust
Company, N.A.
Indenture dated as of April 19, 2018, by and between Clovis Oncology, Inc. and The Bank of New York Mellon
Trust Company, N.A., as Trustee.
First Supplemental Indenture dated as of April 19, 2018, by and between Clovis Oncology, Inc. and The Bank of
New York Mellon Trust Company, N.A.
Indenture dated as of August 13, 2019, by and between Clovis Oncology, Inc. and The Bank of New York Mellon
Trust Company, N.A., as Trustee.
Description of the Registrant’s Securities Registered Pursuant to Section 12 of the Securities Exchange Act of
1934.
Indenture dated as of November 17, 2020, by and between Clovis Oncology, Inc. and The Bank of New York
Mellon Trust Company, N.A., as trustee, relating to the 2024 Notes (2020 Issuance).
10.1*(4)
License Agreement, dated as of June 2, 2011, by and between Clovis Oncology, Inc. and Pfizer Inc.
10.2+(1)
Clovis Oncology, Inc. 2009 Equity Incentive Plan.
10.3+(4)
Clovis Oncology, Inc. 2011 Stock Incentive Plan.
10.4+(24)
Clovis Oncology, Inc. 2020 Stock Incentive Plan.
10.5+(1)
Form of Clovis Oncology, Inc. 2009 Equity Incentive Plan Stock Option Agreement.
10.6+(4)
Form of Clovis Oncology, Inc. 2011 Stock Incentive Plan Stock Option Agreement.
10.7+(23)
Form of Clovis Oncology, Inc. 2020 Stock Incentive Plan Option Agreement.
10.8+(23)
Form of Clovis Oncology, Inc. 2020 Stock Incentive Plan Restricted Stock Unit Agreement.
10.9+(3)
Employment Agreement, dated as of August 24, 2011, by and between Clovis Oncology, Inc. and Patrick J.
Mahaffy.
10.10+(3)
Employment Agreement, dated as of August 24, 2011, by and between Clovis Oncology, Inc. and Gillian C. Ivers-
Read.
10.11+(1)
Indemnification Agreement, dated as of May 15, 2009, between Clovis Oncology, Inc. and Paul Klingenstein.
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Exhibit
Number
10.12+(1)
Indemnification Agreement, dated as of May 15, 2009, between Clovis Oncology, Inc. and James C. Blair.
Exhibit Description
10.13+(1)
Indemnification Agreement, dated as of May 15, 2009, between Clovis Oncology, Inc. and Edward J. McKinley.
10.14+(1)
Indemnification Agreement, dated as of May 15, 2009, between Clovis Oncology, Inc. and Thorlef Spickschen.
10.15+(1)
Indemnification Agreement, dated as of May 15, 2009, between Clovis Oncology, Inc. and M. James Barrett.
10.16+(1)
Indemnification Agreement, dated as of May 15, 2009, between Clovis Oncology, Inc. and Brian G. Atwood.
10.17+(1)
Indemnification Agreement, dated as of May 12, 2009, between Clovis Oncology, Inc. and Patrick J. Mahaffy.
10.18(25)
Exchange and Purchase Agreement dated as of November 4, 2020, by and among Clovis Oncology, Inc. and a
holder of its outstanding 2024 Notes (2019 Issuance).
10.19+(1)
Indemnification Agreement, dated as of May 12, 2009, between Clovis Oncology, Inc. and Gillian C. Ivers-Read.
10.20+(15) Clovis Oncology, Inc. 2011 Employee Stock Purchase Plan, as amended.
10.21+(4)
Clovis Oncology, Inc. 2011 Cash Bonus Plan.
10.22+(2)
Indemnification Agreement, dated as of June 13, 2013, between Clovis Oncology, Inc. and Ginger L. Graham.
10.23+(2)
Indemnification Agreement, dated as of June 13, 2013, between Clovis Oncology, Inc. and Keith Flaherty.
10.24(6)
Stock Purchase Agreement, dated as of November 19, 2013, by and among the Company, EOS, the Sellers listed
on Exhibit A thereto and Sofinnova Capital V FCPR, acting in its capacity as the Sellers’ Representative.
10.25*(6)
Development and Commercialization Agreement, dated as of October 24, 2008, by and between Advenchen
Laboratories LLC and Ethical Oncology Science S.P.A., as amended by the First Amendment, dated as of April 13,
2010 and the Second Amendment, dated as of July 30, 2012.
10.26+(10)
Indemnification Agreement, effective as of August 3, 2015, between Clovis Oncology, Inc. and Lindsey Rolfe.
10.27+(17) Amended and Restated Employment Agreement, dated as of February 27, 2019, by and between Clovis Oncology
UK Limited, Clovis Oncology, Inc. and Dr. Lindsey Rolfe.
10.28+(8)
Indemnification Agreement, dated as of February 17, 2016, between Clovis Oncology, Inc. and Daniel W. Muehl.
10.29+(13) Employment Agreement, dated as of July 6, 2017, by and between Clovis Oncology, Inc. and Daniel Muehl.
10.30*(9)
First Amendment to License Agreement, between Clovis Oncology, Inc. and Pfizer Inc., dated as of August 30,
2016.
10.31+(11)
Form of Clovis Oncology, Inc. 2011 Stock Incentive Plan RSU Agreement.
94
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Exhibit
Number
Exhibit Description
10.32*(11) Manufacturing Services Agreement, by and between Clovis Oncology, Inc. and Lonza Ltd, dated as of October 3,
2016.
10.33*(12)
Strata Trial Collaboration Agreement, by and between Clovis Oncology, Inc. and Strata Oncology, Inc., dated as of
January 30, 2017.
10.34+(16)
Indemnification Agreement, dated as of October 11, 2018, between Clovis Oncology, Inc. and Robert W. Azelby.
10.35+(16)
Indemnification Agreement, dated as of October 11, 2018, between Clovis Oncology, Inc. and Richard A. Fair.
10.36+(17) Employment Agreement, dated as of July 6, 2017, by and between Clovis Oncology, Inc. and Paul Gross.
10.37+(17) Indemnification Agreement, dated as of September 9, 2016, between Clovis Oncology, Inc. and Paul E. Gross.
10.38 (18)
Financing Agreement, dated as of May 1, 2019 among Clovis Oncology, Inc., certain of its subsidiaries named
therein, as Guarantors, the Lenders from time to time party thereto, and the Administrative Agent party thereto.
10.39(18)
Pledge and Security Agreement, dated as of May 1, 2019 among each of the Grantors party thereto and the
Administrative Agent party thereto.
10.40#
License and Collaboration Agreement, dated September 20, 2019 by and between 3B Pharmaceuticals GmbH and
Clovis Oncology, Inc.
21.1(15)
List of Subsidiaries of Clovis Oncology, Inc.
23.1
31.1
31.2
32.1
32.2
101
104
Consent of Independent Registered Public Accounting Firm.
Certification of principal executive officer pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of
1934, as amended.
Certification of principal financial officer pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of
1934, as amended.
Certification of principal executive officer pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
Certification of principal financial officer pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
The following materials from Clovis Oncology, Inc.’s Annual Report on Form 10-K for the year ended December
31, 2020 formatted in Inline Extensible Business Reporting Language (“iXBRL”): (i) the Consolidated Statements
of Operations and Comprehensive Loss, (ii) the Consolidated Balance Sheets, (iii) the Consolidated Statements of
Stockholders’ Equity (Deficit), (iv) the Consolidated Statement of Cash Flows and (v) Notes to Consolidated
Financial Statements
The cover page from Clovis Oncology, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2020
is formatted in iXBRL.
(1) Filed as an exhibit with the Registrant’s Registration Statement on Form S-1 (File No. 333-175080) on June 23, 2011.
95
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(2) Filed as an exhibit with the Registrant’s Current Report on Form 8-K (File No. 001-35347) on June 14, 2013.
(3) Filed as an exhibit with Amendment No. 2 to the Registrant’s Registration Statement on Form S-1 (File No. 333-175080) on
August 31, 2011.
(4) Filed as an exhibit with Amendment No. 3 to the Registrant’s Registration Statement on Form S-1 (File No. 333-175080) on
October 31, 2011.
(5) Filed as an exhibit with the Registrant’s Annual Report on Form 10-K on March 15, 2012.
(6) Filed as an exhibit with the Registrant’s Current Report on Form 8-K (File No. 001-35347) on November 19, 2013.
(7) Filed as an exhibit with the Registrant’s Current Report on Form 8-K (File No. 001-35347) on September 9, 2014.
(8) Filed as an exhibit with the Registrant’s Current Report on Form 8-K (File No. 001-35347) on April 1, 2016.
(9) Filed as an exhibit with the Registrant’s Quarterly Report on Form 10-Q on November 4, 2016.
(10) Filed as an exhibit with the Registrant’s Annual Report on Form 10-K on February 29, 2016.
(11) Filed as an exhibit with the Registrant’s Annual Report on Form 10-K on February 23, 2017.
(12) Filed as an exhibit with the Registrant’s Quarterly Report on Form 10-Q on May 4, 2017.
(13) Filed as an exhibit with the Registrant’s Current Report on Form 8-K (File No. 001-35347) on July 7, 2017.
(14) Filed as an exhibit with the Registrant’s Current Report on Form 8-K (File No. 001-35347) on April 19, 2018.
(15) Filed as an exhibit with the Registrant’s Quarterly Report on Form 10-Q on August 2, 2018.
(16) Filed as an exhibit with the Registrant’s Current Report on Form 8-K (File No. 001-35347) on October 12, 2018.
(17) Filed as an exhibit with the Registrant’s Annual Report on Form 10-K on February 28, 2019.
(18) Filed as an exhibit with the Registrant’s Current Report on Form 8-K (File No. 001-35347) on May 2, 2019.
(19) Filed as an exhibit with the Registrant’s Current Report on Form 8-K (File No. 001-35347) on June 6, 2019.
(20) Filed as an exhibit with the Registrant’s Current Report on Form 8-K (File No. 001-35347) on August 13, 2019.
(21) Filed as an exhibit with the Registrant’s Annual Report on Form 10-K on February 26, 2020.
(22) Filed as an exhibit with the Registrant’s Current Report on Form 8-K (File No. 001-35347) on April 16, 2020.
(23) Filed as an exhibit with the Registrant’s Current Report on Form 8-K (File No. 001-35347) on June 4, 2020.
(24) Filed as an exhibit with the Registrant’s Quarterly Report on Form 10-Q on August 7, 2020.
(25) Filed as an exhibit with the Registrant’s Current Report on Form 8-K (File No. 001-35347) on November 5, 2020.
(26) Filed as an exhibit with the Registrant’s Current Report on Form 8-K (File No. 001-35347) on November 17, 2020.
+ Indicates management contract or compensatory plan.
* Confidential treatment has been sought or granted with respect to portions of this exhibit, which portions have been omitted
and filed separately with the Securities and Exchange Commission.
# Confidential portions of this Exhibit were redacted pursuant to Item 601(b)(10) of Regulation S-K and Clovis
Oncology, Inc. agrees to furnish supplementary to the Securities and Exchange Commission a copy of any redacted
information or omitted schedule and/or exhibit upon request.
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INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Index to Consolidated Financial Statements
Report of Independent Registered Public Accounting Firm
Consolidated Statements of Operations and Comprehensive Loss
Consolidated Balance Sheets
Consolidated Statements of Stockholders’ Equity (Deficit)
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
F-1
F-2
F-5
F-6
F-7
F-8
F-9
Table of Contents
Report of Independent Registered Public Accounting Firm
To the Stockholders and the Board of Directors of Clovis Oncology, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Clovis Oncology, Inc. (the Company) as of December 31,
2020 and 2019, the related consolidated statements of operations and comprehensive loss, stockholders’ equity (deficit), and cash
flows for each of the three years in the period ended December 31, 2020, and the related notes (collectively referred to as the
“consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects,
the financial position of the Company at December 31, 2020 and 2019, and the results of its operations and its cash flows for each
of the three years in the period ended December 31, 2020, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(PCAOB), the Company's internal control over financial reporting as of December 31, 2020, based on criteria established in
Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission
(2013 framework) and our report dated February 24, 2021 expressed an unqualified opinion thereon.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on
the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are
required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable
rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to
error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements,
whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a
test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the
accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the
financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the financial statements that
were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are
material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The
communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and
we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the
accounts or disclosures to which they relate.
Description of the
Matter
Research and development accrual
At December 31, 2020, the Company accrued $43.5 million of research and development
costs. The completeness and valuation of certain clinical study fees incurred in the Company's
accrued research and development costs are subject to risk of estimation uncertainty related to
services received and efforts expended. As discussed in Note 2 of the Company’s consolidated
financial statements, costs for certain development activities, such as clinical trials, are
recognized based on an evaluation of the progress to completion of specific tasks using data
such as patient enrollment, clinical site activations or information provided to the Company by
its vendors on their actual costs incurred. Payments for these activities are based on the terms
of the individual arrangements, which may differ from the pattern of costs incurred.
Auditing management’s accrual of research and development costs was complex and
judgmental due to the significant estimation required by management in determining the time
period over which services will be performed, enrollment of patients, number
F-2
Table of Contents
of sites activated and the level of effort to be expended in each period. The
Company has contracts with multiple contract research organizations (“CROs”)
that conduct and manage clinical studies on its behalf. The financial terms of
these agreements are subject to negotiation and amendment, vary from contract to
contract and may result in uneven payment flows.
How We Addressed
the Matter in Our
Audit
We obtained an understanding, evaluated the design and tested the operating
effectiveness of controls over the Company’s accounting for accrued research and
development costs. For example, we tested controls over management’s review of
the research and development accrual calculation, including review of the
confirmations from CROs, patient enrollment, sites activated, and the associated
contract costs.
Description of the
Matter
To test the estimated accrued research and development, we performed audit
procedures that included, among others, assessing methodologies and testing the
significant assumptions discussed above, testing the underlying data used by
management, and assessing the historical accuracy of management’s estimates.
We performed inquiries of clinical research managers to understand the status of
significant trials, discussed any delays or new developments with the studies to
understand the impact of the activity on the accounting for the studies, and
confirmed directly with CROs the status of significant cost drivers, such as
patient enrollment and site activation.
Sixth Street Financing Agreement
At December 31, 2020, the Company has drawn $99.8 million in principal and
incurred $12.6 million in interest expense in relation to the Sixth Street Financing
Arrangement. As discussed in Note 10 to the consolidated financial statements,
the Company entered into a financing agreement in 2019 in which they plan to
borrow amounts required to reimburse actual costs and expenses incurred in
clinical trials during each fiscal quarter. They are obligated to make loan
payments on a quarterly basis and timing and amount of repayment is dependent
on several defined events. The payments are based on a certain percentage of
revenues, with a maximum repayment amount each quarter. Therefore, the
amounts borrowed and amounts repaid under the loan are variable. Each period,
the Company will determine a new effective interest rate based on the revised
estimate of expected remaining cash flows. The new effective interest rate will be
used to recognize interest expense prospectively for the remaining periods.
Auditing the financing agreement is complex, and the estimation of future
expected cash flows is subjective, and is affected by expected future market or
economic conditions. The assessment of these terms and future cash flows has a
significant effect on the accounting for the agreement.
How We Addressed
the Matter in Our
Audit
We obtained an understanding, evaluated the design and tested the operating
effectiveness of controls over the Company’s accounting for the financing
agreement, including management’s review of the probabilities of certain
conditions or events and certain other assumptions used in the calculation of the
interest rate, including the revenue growth rates and projected clinical expenses
incurred.
To test the financing agreement, we performed audit procedures that included,
among others, testing the assumptions underlying the expected cash flows used to
calculate the interest rate, including the revenue growth rates and projected
clinical expenses incurred. We compared the assumptions used by management to
current industry and economic trends and evaluated whether changes to the
Company’s customer base or product approvals and other factors would affect the
assumptions. We also evaluated management’s estimation of the probability of
whether certain conditions or events, which drive certain accounting conclusions,
were probable at December 31, 2020. We assessed the historical accuracy of
management’s estimates and performed sensitivity analyses of the significant
assumptions to evaluate the changes in the calculated interest expense that would
result from changes in those assumptions.
F-3
Table of Contents
We have served as the Company’s auditor since 2009.
/s/ Ernst & Young LLP
Denver, Colorado
February 24, 2021
F-4
CLOVIS ONCOLOGY, INC.
Consolidated Statements of Operations and Comprehensive Loss
Table of Contents
`
Revenues:
Product revenue
Operating expenses:
Cost of sales - product
Cost of sales - intangible asset amortization
Research and development
Selling, general and administrative
Acquired in-process research and development
Other operating expenses
Total expenses
Operating loss
Other income (expense):
Interest expense
Foreign currency loss
(Loss) gain on extinguishment of debt
Loss on convertible senior notes conversion
Legal settlement loss
Other income
Other income (expense), net
Loss before income taxes
Income tax benefit (expense)
Net loss
Other comprehensive income (loss):
Foreign currency translation adjustments, net of tax
Net unrealized (loss) gain on available-for-sale securities, net of tax
Other comprehensive income (loss):
Comprehensive loss
Loss per basic and diluted common share:
Basic and diluted net loss per common share
Basic and diluted weighted average common shares outstanding
Year ended December 31,
2020
2018
2019
(in thousands, except per share amounts)
$
164,522
$
143,006
$
95,388
36,128
5,177
257,707
163,894
—
3,804
466,710
(302,188)
(30,508)
(72)
(3,277)
(35,075)
—
1,361
(67,571)
(369,759)
547
(369,212)
567
(6)
561
(368,651)
(4.38)
84,307
29,926
4,760
283,146
182,769
9,440
9,711
519,752
(376,746)
(19,405)
(547)
18,480
—
(26,750)
6,342
(21,880)
(398,626)
(1,798)
(400,424)
(272)
41
(231)
(400,655)
(7.43)
53,873
$
$
$
$
19,444
2,630
231,347
175,781
—
—
429,202
(333,814)
(13,183)
(346)
—
—
(27,975)
7,917
(33,587)
(367,401)
(608)
(368,009)
(2,543)
82
(2,461)
(370,470)
(7.07)
52,066
$
$
See accompanying Notes to Consolidated Financial Statements.
F-5
Table of Contents
CLOVIS ONCOLOGY, INC.
Consolidated Balance Sheets
ASSETS
Current assets:
Cash and cash equivalents
Accounts receivable, net
Inventories, net
Available-for-sale securities
Prepaid research and development expenses
Other current assets
Total current assets
Inventories
Deposit on inventory
Property and equipment, net
Right-of-use assets, net
Intangible assets, net
Goodwill
Other assets
Total assets
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable
Accrued research and development expenses
Lease liabilities
Convertible senior notes
Other accrued expenses
Total current liabilities
Long-term lease liabilities - less current portion
Convertible senior notes - less current portion
Borrowings under financing agreement
Other long-term liabilities
Total liabilities
December 31,
2020
December 31,
2019
$
$
$
$
240,229
26,511
30,714
—
4,245
9,130
310,829
104,123
—
$
$
12,085
30,438
65,743
63,074
19,262
605,554
26,692
43,500
5,330
64,198
45,208
184,928
31,640
434,846
110,917
1,971
764,302
161,833
20,562
26,519
134,826
3,881
18,847
366,468
98,053
12,350
15,287
28,141
62,920
63,074
23,311
669,604
32,237
53,214
5,405
—
42,228
133,084
29,479
644,751
34,991
1,556
843,861
Commitments and contingencies (Note 13)
Stockholders' equity:
Preferred stock, par value $0.001 per share; 10,000,000 shares authorized, no shares issued
and outstanding at December 31, 2020 and December 31, 2019
Common stock, $0.001 par value per share, 200,000,000 shares authorized at
December 31, 2020 and December 31, 2019, respectively; 103,699,109 and 54,956,341
shares issued and outstanding at December 31, 2020 and December 31, 2019, respectively
Additional paid-in capital
Accumulated other comprehensive loss
Accumulated deficit
Total stockholders' deficit
Total liabilities and stockholders' equity (deficit)
—
—
104
2,498,179
(44,304)
(2,612,727)
(158,748)
605,554
$
55
2,114,068
(44,865)
(2,243,515)
(174,257)
669,604
$
See accompanying Notes to Consolidated Financial Statements.
F-6
Table of Contents
CLOVIS ONCOLOGY, INC.
Consolidated Statements of Stockholders’ Equity (Deficit)
Common Stock
Shares
Amount
Accumulated
Additional
Paid-In
Capital
Other
Comprehensive
Income (Loss)
Accumulated
Deficit
(in thousands, except for share amounts)
$
$ 1,887,196
(42,173) $ (1,477,439) $
Total
367,635
Balance at January 1, 2018
Issuance of common stock, net of issuance
costs
Issuance of common stock under employee
stock purchase plan
Exercise of stock options
Issuance of common stock from vesting of
restricted stock units
Share-based compensation expense
Net unrealized gain on available-for-sale
securities
Foreign currency translation adjustments
Adoption of new revenue recognition
standard
Net loss
Balance at December 31, 2018
Issuance of common stock under employee
stock purchase plan
Exercise of stock options
Issuance of common stock from vesting of
restricted stock units
Share-based compensation expense
Legal settlement
Net unrealized gain on available-for-sale
securities
Foreign currency translation adjustments
Other financing costs
Net loss
Balance at December 31, 2019
Issuance of common stock, net of issuance
costs
Issuance of common stock under employee
stock purchase plan
Exercise of stock options
Issuance of common stock from vesting of
restricted stock units
Share-based compensation expense
Net unrealized loss on available-for-sale
securities
Foreign currency translation adjustments
Convertible senior notes conversion
Other financing costs
Net loss
Balance at December 31, 2020
50,565,119
$
1,837,898
82,820
72,886
238,793
—
—
—
—
—
52,797,516
175,634
188,829
312,304
—
1,482,058
—
—
—
—
54,956,341
283,588
34,599
1,012,699
—
—
—
36,321,882
—
—
$
103,699,109
51
2
—
—
—
—
—
—
—
—
53
—
—
—
—
2
—
—
—
—
55
1
—
1
—
—
—
36
—
—
93,888
2,097
1,870
—
49,090
—
—
—
—
—
—
—
—
—
82
(2,543)
—
—
2,034,141
(44,634)
1,905
1,361
—
54,304
22,745
—
—
(388)
—
—
—
—
—
—
41
(272)
—
—
2,114,068
(44,865)
—
93,890
—
—
—
—
—
—
2,097
1,870
—
49,090
82
(2,543)
2,357
(368,009)
(1,843,091)
2,357
(368,009)
146,469
—
—
—
—
—
1,905
1,361
—
54,304
22,747
—
—
—
(400,424)
(2,243,515)
41
(272)
(388)
(400,424)
(174,257)
1,419
(57)
(1)
50,794
—
—
248,599
(59)
—
$
—
—
—
—
—
—
83,427
—
—
—
—
1,420
(57)
—
50,794
(6)
567
—
—
—
(6)
—
567
—
248,635
—
(59)
—
(369,212)
(369,212)
(44,304) $ (2,612,727) $ (158,748)
11,090,000
11
83,416
104
$ 2,498,179
See accompanying Notes to Consolidated Financial Statements.
F-7
Table of Contents
CLOVIS ONCOLOGY, INC.
Consolidated Statements of Cash Flows
Operating activities
Net loss
Adjustments to reconcile net loss to net cash used in operating activities:
Share-based compensation expense
Depreciation and amortization
Amortization of premiums and discounts on available-for-sale securities
Amortization of debt issuance costs
Write-off of debt issuance costs related to convertible senior notes transactions
Loss (gain) on extinguishment of debt
Loss on convertible senior notes conversion
Legal settlement loss
Acquired in-process research and development
Other
Changes in operating assets and liabilities:
Accounts receivable
Inventory
Prepaid and accrued research and development expenses
Deposit on inventory
Other operating assets and liabilities
Accounts payable
Other accrued expenses
Net cash used in operating activities
Investing activities
Purchases of property and equipment
Proceeds from sale of property and equipment
Purchases of available-for-sale securities
Sales of available-for-sale securities
Acquired in-process research and development - milestone payment
Net cash provided by (used in) investing activities
Financing activities
Proceeds from sale of common stock, net of issuance costs
Proceeds from issuance of convertible senior notes, net of issuance costs
Payment of convertible senior notes
Extinguishment of convertible senior notes
Proceeds from borrowings under ATHENA financing agreement
Proceeds from the exercise of stock options and employee stock purchases
Payments on finance leases
Payments on other long-term liabilities
Net cash provided by financing activities
Effect of exchange rate changes on cash and cash equivalents
Increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
Supplemental disclosure of cash flow information:
Cash paid for interest
Non-cash investing and financing activities:
Vesting of restricted stock units
2020
Year ended December 31,
2019
(in thousands)
2018
$ (369,212) $ (400,424) $ (368,009)
50,794
8,198
(174)
2,672
4,345
3,277
35,075
—
—
340
(5,407)
5,321
(8,313)
—
10,831
(5,852)
15,377
(252,728)
(354)
—
(9,962)
144,644
(8,000)
126,328
54,304
7,768
(1,521)
2,858
—
(18,480)
—
22,747
—
804
(7,518)
(26,160)
23,233
—
(6,837)
12,289
13,322
(323,615)
(3,290)
275
(459,835)
621,998
(15,750)
143,398
246,668
56,619
(164,443)
—
65,119
1,362
(1,470)
(211)
203,644
1,152
78,396
161,833
$ 240,229
—
254,879
—
(169,853)
32,871
3,266
(1,115)
(160)
119,888
286
(60,043)
221,876
$ 161,833
$
$
12,075
7,493
$
$
10,515
5,442
$
$
$
49,090
4,601
1,345
2,178
—
—
—
—
—
—
(3,371)
(49,936)
9,145
(12,350)
(8,750)
5,770
4,290
(365,997)
(9,242)
—
(500,000)
300,000
(55,000)
(264,242)
93,890
290,887
—
—
—
3,967
(245)
(35)
388,464
(547)
(242,322)
464,198
221,876
9,188
10,808
F-8
Table of Contents
See accompanying Notes to Consolidated Financial Statements.
CLOVIS ONCOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Nature of Business
We are a biopharmaceutical company focused on acquiring, developing and commercializing innovative anti-cancer agents in
the United States, Europe and additional international markets. We target our development programs for the treatment of specific
subsets of cancer populations, and simultaneously develop, with partners, for those indications that require them, diagnostic tools
intended to direct a compound in development to the population that is most likely to benefit from its use.
Our marketed product Rubraca® (rucaparib), an oral small molecule inhibitor of poly ADP-ribose polymerase (“PARP”), is
marketed in the United States for two indications specific to recurrent epithelial ovarian, fallopian tube or primary peritoneal
cancer and also an indication specific to metastatic castration-resistant prostate cancer (“mCRPC”). The initial indication
received approval from the FDA in December 2016 and covers the treatment of adult patients with deleterious BRCA (human
genes associated with the repair of damaged DNA) mutation (germline and/or somatic)-associated epithelial ovarian, fallopian
tube, or primary peritoneal cancer who have been treated with two or more chemotherapies and selected for therapy based on an
FDA-approved companion diagnostic for Rubraca. In April 2018, the FDA also approved Rubraca for the maintenance treatment
of adult patients with recurrent epithelial ovarian, fallopian tube, or primary peritoneal cancer who are in a complete or partial
response to platinum-based chemotherapy. The approval in this second, broader and earlier-line indication on a priority review
timeline was based on positive data from the phase 3 ARIEL3 clinical trial. Diagnostic testing is not required for patients to be
prescribed Rubraca in this maintenance treatment indication.
In May 2020, the FDA approved Rubraca for the treatment of adult patients with mCRPC associated with a deleterious BRCA
mutation (germline and/or somatic) who have been treated previously with androgen receptor-directed therapy and a taxane-
based chemotherapy. The FDA approved this third indication under accelerated approval based on objective response rate and
duration of response data from the TRITON2 clinical trial. We launched Rubraca for this indication in the U.S. following receipt
of the approval. As an accelerated approval, continued approval for this indication may be contingent upon verification and
description of clinical benefit in confirmatory trials. The TRITON3 clinical trial is expected to serve as the confirmatory study for
Rubraca’s approval in mCRPC. In August 2020, the FDA approved the use of Foundation Medicine’s blood-based diagnostic
test, FoundationOne Liquid CDx, as a companion diagnostic for the detection of deleterious BRCA mutation (germline and/or
somatic) to select mCRPC patients for treatment with Rubraca.
In Europe, the European Commission granted a conditional marketing authorization in May 2018 for Rubraca as monotherapy
treatment of adult patients with platinum-sensitive, relapsed or progressive, BRCA mutated (germline and/or somatic), high-grade
epithelial ovarian, fallopian tube, or primary peritoneal cancer, who have been treated with two or more prior lines of platinum-
based chemotherapy, and who are unable to tolerate further platinum-based chemotherapy. In January 2019, the European
Commission granted a variation to the marketing authorization to include the maintenance treatment of adult patients with
recurrent epithelial ovarian, fallopian tube, or primary peritoneal cancer who are in a complete or partial response to platinum-
based chemotherapy. With this approval, Rubraca is authorized in Europe for certain patients in the recurrent ovarian cancer
maintenance setting regardless of their BRCA mutation status. Following successful reimbursement negotiations, Rubraca has
been launched in each of Germany, United Kingdom, Italy, France, Spain and the Netherlands, and reimbursement is pending in
Switzerland.
In December 2020, Rubraca met the primary study endpoint of significantly improving PFS versus chemotherapy in the
ARIEL4 confirmatory study. Additional ARIEL4 study results are expected to be submitted for presentation at a medical
congress meeting in 2021. ARIEL4 is a Phase 3 multicenter, randomized study of Rubraca versus chemotherapy, which enrolled
relapsed ovarian cancer patients with BRCA mutations (inclusive of germline and/or somatic) who had received two or more prior
lines of chemotherapy. Completion of ARIEL4 is a post-marketing commitment in the U.S. and Europe.
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Beyond our labeled indications, we have a clinical development program underway to further evaluate Rubraca in a variety of
solid tumor types, either as monotherapy or in combination with other agents, including several studies as part of our ongoing
clinical collaboration with Bristol Myers Squibb to evaluate its immunotherapy Opdivo (nivolumab) in combination with
Rubraca. We anticipate initial data of Rubraca monotherapy versus placebo from our ATHENA study in the second half of 2021,
with the results of Rubraca versus Opdivo in all study populations a year or more later. However, the timing of the ATHENA
data readouts is dependent on the timing of data maturity driven by PFS events.
We initiated the Phase 2 LODESTAR study in December 2019 to evaluate Rubraca as monotherapy treatment in patients with
recurrent solid tumors associated with a deleterious mutation in homologous recombination repair genes. Based on our
interactions with the FDA, we believe that this study may be registration-enabling for a targeted gene- and tumor-agnostic label,
if data from the trial support the potential for an accelerated approval. Assuming enrollment in this study continues as planned,
and subject to the data, we may potentially file an sNDA with the FDA for this indication in the second half of 2021 or the first
half of 2022.
We hold worldwide rights to Rubraca.
Pursuant to our license and collaboration agreement with 3BP, entered into in September 2019, we have initiated development
of a peptide-targeted radionuclide therapy (“PTRT”) and imaging agent targeting fibroblast-activating protein (“FAP”). We have
completed sufficient preclinical work to support an IND for the lead candidate under our license and collaboration agreement,
designated internally as FAP-2286. Accordingly, we submitted two INDs for FAP-2286 for use as imaging and treatment agents
in December 2020 to support an initial Phase 1 study to determine the dose and tolerability of FAP-2286 as a therapeutic agent
with expansion cohorts planned in multiple tumor types as part of a global development program. The INDs are expected to
become effective following receipt and submission, and acceptance by the FDA, of satisfactory chemistry, manufacturing and
controls (“CMC”) data for the imaging agent from clinical sites. The FAP-targeting imaging agent will be utilized to identify
tumors that contain FAP for treatment in the Phase 1 LuMIERE clinical study, which we anticipate initiating in the first half of
2021.
We hold U.S. and global rights to FAP-2286, excluding Europe (defined to include Russia, Turkey and Israel), where 3BP
retains rights. We are also collaborating with 3BP on a discovery program directed to up to three additional, undisclosed targets
for targeted radionuclide therapy, to which we would obtain global rights for any resulting product candidates.
Lucitanib, our second product candidate currently in clinical development, is an investigational, oral, potent angiogenesis
inhibitor which inhibits vascular endothelial growth factor receptors 1 through 3 (“VEGFR1-3”), platelet-derived growth factor
receptors alpha and beta (“PDGFR α/β”) and fibroblast growth factor receptors 1 through 3 (“FGFR1-3”). Lucitanib inhibits the
same three pathways as Lenvima® (lenvatinib), which has received an FDA approval for use in endometrial cancer in
combination with Keytruda® (pembrolizumab), a PD-1 inhibitor. This, together with preclinical data for lucitanib in combination
with a PD-1 inhibitor that demonstrated enhanced anti-tumor activity compared to that of single agents, represent a scientific
rationale for development of lucitanib in combination with a PD-1 inhibitor, and in February 2019, lucitanib was added to our
clinical collaboration with Bristol Myers Squibb. The Clovis-sponsored LIO-1 study of lucitanib in combination with nivolumab
in advanced solid tumors and gynecologic cancers is currently enrolling patients in the Phase 2 part of the study. We expect to
present interim data from this study at medical meetings in 2021, which are expected to include interim results from the ovarian
and endometrial cancer expansion cohorts. We hold the global (excluding China) development and commercialization rights for
lucitanib.
Liquidity
We have incurred significant net losses since inception and have relied on our ability to fund our operations through debt and
equity financings. We expect operating losses and negative cash flows to continue for the foreseeable future. As we continue to
incur losses, transition to profitability is dependent upon achieving a level of revenue from Rubraca adequate to support our cost
structure. We may never achieve profitability, and unless and until we do, we will continue to need to raise additional cash.
Based on current estimates, we believe that our existing cash, cash equivalents and available-for-sale securities will allow us
to fund our operating plan through at least the next 12 months.
F-10
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2. Summary of Significant Accounting Policies
Basis of Presentation
The accompanying financial statements have been prepared in accordance with U.S. generally accepted accounting principles
(“U.S. GAAP”). The consolidated financial statements include our accounts and our wholly-owned subsidiaries. All significant
intercompany balances and transactions have been eliminated in consolidation.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and
assumptions that affect the reported amounts of assets, liabilities, expenses and revenue and related disclosures. On an ongoing
basis, we evaluate our estimates, including estimates related to revenue deductions, intangible asset impairment, clinical trial
accruals and share-based compensation expense. We base our estimates on historical experience and other market-specific or
other relevant assumptions that we believe to be reasonable under the circumstances. Actual results may differ from those
estimates or assumptions.
Revenue Recognition
We are currently approved to sell Rubraca in the United States and the Europe markets. We distribute our product principally
through a limited number of specialty distributor and specialty pharmacy providers, collectively, our customers. Our customers
subsequently sell our products to patients and health care providers. Separately, we have arrangements with certain payors and
other third-parties that provide for government-mandated and privately-negotiated rebates, chargebacks and discounts. See Note
3, Revenue Recognition.
Cost of Sales – Product
Product cost of sales consists primarily of materials, third-party manufacturing costs as well as freight and royalties owed to
our licensing partners for Rubraca sales.
Cost of Sales – Intangible Asset Amortization
Cost of sales for intangible asset amortization consists of the amortization of capitalized milestone payments made to our
licensing partners upon FDA approval of Rubraca. Milestone payments are amortized on a straight-line basis over the estimated
remaining patent life of Rubraca.
Fair Value of Financial Instruments
Cash, cash equivalents, available-for-sale securities and contingent purchase consideration are carried at fair value. Financial
instruments, including other current assets and accounts payable, are carried at cost, which approximates fair value given their
short-term nature (see Note 5, Fair Value Measurements).
Cash, Cash Equivalents and Available-for-Sale Securities
We consider all highly liquid investments with original maturities at the date of purchase of three months or less to be cash
equivalents. Cash and cash equivalents include bank demand deposits and money market funds that invest primarily in certificate
of deposits, commercial paper and U.S. government and U.S. government agency obligations.
Marketable securities are considered to be available-for-sale securities and consist of U.S. treasury securities. Available-for-
sale securities are reported at fair value on the Consolidated Balance Sheets and unrealized gains and losses are included in
accumulated other comprehensive income/loss on the Consolidated Balance Sheets. Realized gains and losses, amortization of
premiums and discounts and interest and dividends earned are included in other income (expense) on the Consolidated
Statements of Operations and Comprehensive Loss. The cost of investments for purposes of computing realized and unrealized
gains and losses is based on the specific identification method. Investments with maturities beyond one year are classified as
short-term based on our intent to fund current operations with these securities or to make them available for current operations.
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We determine whether a decline in the fair value below the amortized cost basis (i.e., impairment) of an available-for-sale debt
is security is due to credit-related factors or noncredit-related factors. Any impairment that is not credit related is recognized in
accumulated other comprehensive loss, net of applicable taxes. When evaluating an impairment, entities may not use the length
of time a security has been in an unrealized loss position as a factor, either by itself or in combination with other factors, to
conclude that a credit loss does not exist.
Accounts Receivable
We provide an allowance for credit losses based on experience and specifically identified risks. Accounts receivable are
charged off against the allowance when we determine that recovery is unlikely and we cease collection efforts.
Inventory
Inventories are stated at the lower of cost or estimated net realizable value, on a first-in, first-out (“FIFO”) basis. Inventories
include active pharmaceutical ingredient (“API”), contract manufacturing costs and overhead allocations. We begin capitalizing
incurred inventory related costs upon regulatory approval. Prior to regulatory approval, incurred costs for the manufacture of
drugs that could potentially be available to support the commercial launch of our products are recognized as research and
development expense.
We regularly analyze our inventory levels for excess quantities and obsolescence (expiration), considering factors such as
historical and anticipated future sales compared to quantities on hand and the remaining shelf-life of Rubraca. Rubraca finished
goods have a shelf-life of four years from the date of manufacture. We expect to sell the finished goods prior to expiration. The
API currently has a shelf-life of four years from the date of manufacture but can be retested at an immaterial cost with no
expected reduction in potency, thereby extending its shelf-life as needed. We expect to consume substantially all of the API over
a period of approximately seven years based on our long-range sales projections of Rubraca.
We write down inventory that has become obsolete, inventory that has a cost basis in excess of its estimated realizable value
and/or inventory in excess of expected sales requirements. Expired inventory would be disposed of and the related costs would be
written off as cost of product revenue. Inventories that are not expected to be consumed within 12 months following the balance
sheet date are classified as long-term inventories. Long-term inventories primarily consist of API.
API is currently produced by Lonza. As the API has undergone significant manufacturing specific to its intended purpose at
the point it is purchased by us, we classify the API as work-in-process inventory. In addition, we currently manufacture Rubraca
finished goods with a single third-party manufacturer. The disruption or termination of the supply of API or the disruption or
termination of the manufacturing of our commercial products could have a material adverse effect on our business, financial
position and results of operations. API that is written off due to damage and certain costs related to our dedicated production train
at Lonza are included in Other Operating Expenses in the Consolidated Statements of Operations and Comprehensive Loss.
Inventory used in clinical trials is expensed as research and development expense when it has been identified for such use.
Property and Equipment
Property and equipment are stated at cost, less accumulated depreciation. Property and equipment are depreciated using the
straight-line method over the estimated useful lives of the assets. Equipment purchased for use in manufacturing and clinical
trials is evaluated to determine whether the equipment is solely beneficial for a drug candidate in the development stage or
whether it has an alternative use. Equipment with an alternative use is capitalized. Leased assets meeting certain finance lease
criteria are capitalized and the present value of the related lease payments is recorded as a liability. Assets under finance lease
arrangements are depreciated using the straight-line method over the estimated useful lives. Leasehold improvements are
amortized over the economic life of the asset or the lease term,
F-12
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whichever is shorter. Maintenance and repairs are expensed as incurred. The estimated useful lives of our capitalized assets are as
follows:
Computer hardware and software
Leasehold improvements
Laboratory, manufacturing and office equipment
Furniture and fixtures
Long-Lived Assets
Estimated
Useful Life
3 to 5 years
6 years
5 to 7 years
10 years
We review long-lived assets for impairment when events or changes in circumstances indicate that the carrying value of the
assets may not be recoverable. Recoverability is measured by comparison of the assets’ book value to future net undiscounted
cash flows that the assets are expected to generate. If the carrying value of the assets exceed their future net undiscounted cash
flows, an impairment charge is recognized for the amount by which the carrying value of the assets exceeds the fair value of the
assets.
Intangible Assets, Net
Definite-lived intangible assets related to capitalized milestones under license agreements are amortized on a straight-line
basis over their remaining useful lives, which are estimated to be the remaining patent life. If our estimate of the product’s useful
life is shorter than the remaining patent life, then a shorter period is used. Amortization expense is recorded as a component of
cost of sales on the Consolidated Statements of Operations and Comprehensive Loss.
Intangible assets are evaluated for impairment at least annually in the fourth quarter or more frequently if impairment
indicators exist. Events that could result in an impairment, or trigger an interim impairment assessment, include the decision to
discontinue the development of a drug, the receipt of additional clinical or nonclinical data regarding our drug candidate or a
potentially competitive drug candidate, changes in the clinical development program for a drug candidate, or new information
regarding potential sales for the drug. In connection with any impairment assessment, the fair value of the intangible assets as of
the date of assessment is compared to the carrying value of the intangible asset. Impairment losses are recognized if the carrying
value of an intangible asset is both not recoverable and exceeds its fair value.
Goodwill
Goodwill was recorded as a result of the EOS acquisition in November 2013. Goodwill represents the excess of the purchase
price over the fair value of net assets acquired in a business combination accounted for under the acquisition method of
accounting and is not amortized, but is subject to impairment testing at least annually in the fourth quarter or when a triggering
event is identified that could indicate a potential impairment. We are organized as two reporting units based on our operating
segments, U.S. and ex-U.S. We determined that our goodwill was allocated to the U.S. reporting unit and performed impairment
testing by assessing qualitative factors to determine whether it is more likely than not (that is, a likelihood of more than 50
percent) that the fair value of a reporting unit is less than its carrying amount. Based on our qualitative assessment, we
determined that it is not more likely than not that the fair value of a reporting unit is less than its carrying amount. Therefore, the
quantitative goodwill impairment test is not necessary. There is no goodwill impairment as of December 31, 2020.
F-13
Table of Contents
Other Current Assets
Other current assets are comprised of the following (in thousands):
Prepaid insurance
Prepaid IT
Prepaid variable considerations
Prepaid expenses - other
Value-added tax ("VAT") receivable
Receivable - other
Other
Total
Other Accrued Expenses
Other accrued expenses are comprised of the following (in thousands):
Accrued personnel costs
Accrued interest payable for convertible senior notes
Income tax payable
Accrued corporate legal fees and professional services
Accrued royalties
Accrued variable considerations
Accrued expenses - other
Total
December 31, December 31,
2020
2019
$
$
782
753
1,191
2,193
2,202
1,884
125
9,130
$
$
505
698
550
2,821
11,920
2,176
177
18,847
December 31, December 31,
2020
18,334
2,991
907
459
6,617
11,701
4,199
45,208
$
$
2019
16,915
5,903
3,505
310
6,038
5,748
3,809
42,228
$
$
Segment Information
As of December 31, 2020, we determined that we have two operating and reportable segments, U.S. and ex-U.S., based on
product revenue by geographic areas since our product revenue outside of the United States represented 11% of total product
revenue. We designated our reporting segments based on the internal reporting used by the Chief Operating Decision Maker
(“CODM”), which is our Chief Executive Officer, for making decisions and assessing performance as the source of our
reportable segments. The CODM allocates resources and assesses the performance of each operating segment based on product
revenue by geographic areas. Accordingly, we view our business as two reportable operating segments to evaluate performance,
allocate resources, set operational targets and forecast our future period financial results.
We manage our assets on a company basis, not by segments, as many of our assets are shared or commingled. Our CODM
does not regularly review asset information by reportable segment. The majority of long-lived assets for both segments are
located in the United States.
Research and Development Expense
Research and development costs are charged to expense as incurred and include, but are not limited to, salary and benefits,
share-based compensation, clinical trial activities, drug development and manufacturing, companion diagnostic development and
third-party service fees, including contract research organizations and investigative sites.
Costs for certain development activities, such as clinical trials, are recognized based on an evaluation of the progress to
completion of specific tasks using data such as patient enrollment, clinical site activations or information provided to us by our
vendors on their actual costs incurred. Payments for these activities are based on the terms of the individual arrangements, which
may differ from the pattern of costs incurred and are reflected on the Consolidated Balance Sheets as prepaid or accrued research
and development expenses.
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Table of Contents
Acquired In-Process Research and Development Expense
We have acquired and expect to continue to acquire the rights to develop and commercialize new drug candidates. The upfront
payments to acquire a new drug compound, as well as subsequent milestone payments, are immediately expensed as acquired in-
process research and development provided that the drug has not achieved regulatory approval for marketing and, absent
obtaining such approval, has no alternative future use. Once regulatory approval is received, payments to acquire rights, and the
related milestone payments, are capitalized and the amortization of such assets recorded to product cost of sales.
Share-Based Compensation Expense
Share-based compensation is recognized as expense for all share-based awards made to employees and directors and is based
on estimated fair values. We determine equity-based compensation at the grant date using the Black-Scholes option pricing
model. The value of the award that is ultimately expected to vest is recognized as expense on a straight-line basis over the
requisite service period. Any changes to the estimated forfeiture rates are accounted for prospectively.
Advertising Expense
In connection with the FDA approval and commercial launch of Rubraca in 2016, we began to incur advertising costs.
Advertising costs are expense when services are performed, or goods are delivered. We incurred $17.0 million, $21.2 million and
$15.9 million in expense for the years ended December 31, 2020, 2019 and 2018, respectively.
Legal Settlement Loss
Following our regulatory announcement in November 2015 of adverse developments in our ongoing clinical trials for
rociletinib, we and certain of our current and former executives were named in various securities lawsuits. As a result of these
lawsuits, during 2019, we recorded a charge of $26.8 million to settle the Antipodean Complaint. During 2018, we recorded a
charge of $8.0 million related to an agreement to resolve a potential litigation claim against us and our officers and we also
recorded a charge of $20.0 million related to an agreement reached with the SEC to resolve its investigation. For the remaining
actions related to rociletinib, see Note 13, Commitments and Contingencies, for additional information.
Concentration of Credit Risk
Financial instruments that potentially subject us to concentrations of credit risk are primarily cash, cash equivalents and
available-for-sale securities. We maintain our cash and cash equivalent balances in the form of money market accounts with
financial institutions that we believe are creditworthy. Available-for-sale securities are invested in accordance with our
investment policy. The investment policy includes guidelines on the quality of the institutions and financial instruments and
defines allowable investments that we believe minimizes the exposure to concentration of credit risk. We have no financial
instruments with off-balance sheet risk of accounting loss.
Foreign Currency
The assets and liabilities of our foreign operations are translated into U.S. dollars at current exchange rates and the results of
operations are translated at the average exchange rates for the reported periods. The resulting translation adjustments are included
in accumulated other comprehensive loss on the Consolidated Balance Sheets. Transactions denominated in currencies other than
the functional currency are recorded based on exchange rates at the time such transactions arise. Transaction gains and losses are
recorded to foreign currency gains (losses) on the Consolidated Statements of Operations and Comprehensive Loss. As of
December 31, 2020, and 2019, approximately 3% and 4%, respectively, of our total liabilities were denominated in currencies
other than the functional currency.
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Income Taxes
We account for income taxes under the asset and liability method. Deferred tax assets and liabilities are recognized for the
future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and
liabilities and their respective tax bases using enacted tax rates in effect for the year in which the differences are expected to
affect taxable income. Tax benefits are recognized when it is more likely than not that a tax position will be sustained during an
audit. Deferred tax assets are reduced by a valuation allowance if current evidence indicates that it is considered more likely than
not that these benefits will not be realized.
Recently Adopted Accounting Standards
In June 2016, the FASB issued ASU 2016-13, “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit
Losses on Financial Instruments”. The guidance is effective for fiscal years beginning after December 15, 2019, including interim
periods within those fiscal years. Early adoption is permitted. We adopted ASU 2016-13 as of January 1, 2020. Upon the
adoption of ASU 2016-13 on January 1, 2020, we are required to determine whether a decline in the fair value below the
amortized cost basis (i.e., impairment) of an available-for-sale debt is security is due to credit-related factors or noncredit-related
factors. Any impairment that is not credit related is recognized in accumulated other comprehensive loss, net of applicable taxes.
When evaluating an impairment, entities may not use the length of time a security has been in an unrealized loss position as a
factor, either by itself or in combination with other factors, to conclude that a credit loss does not exist. We applied this
impairment model for available-for-sale debt securities as of January 1, 2020 and no impairment was recognized upon adoption.
In addition, no impairment was recognized for the year ended December 31, 2020. We recognized a minimal allowance for credit
losses related to our accounts receivable at December 31, 2020. The adoption of ASU 2016-13 did not materially impact our
consolidated financial statements and disclosures.
In August 2018, the FASB issued ASU 2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework – Changes to
the Disclosure Requirements for Fair Value Measurement”. The guidance is effective for fiscal years beginning after December
15, 2019, including interim periods within those fiscal years. We adopted ASU 2018-13 as of January 1, 2020 and there was no
material impact on our consolidated financial statements and related disclosures.
Recently Issued Accounting Standards
From time to time, the FASB or other standards setting bodies issue new accounting pronouncements. Updates to the FASB
Accounting Standards Codification (“ASC”) are communicated through issuance of an ASU.
In August 2020, the FASB issued guidance that simplifies an issuer’s accounting for debt and equity instruments. The
guidance is effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years.
Early application is permitted. We plan to adopt this guidance on January 1, 2022. We will evaluate the impact this guidance may
have on our consolidated financial statements and related disclosures as the adoption date approaches.
3. Revenue Recognition
We are currently approved to sell Rubraca in the United States and Europe markets. We distribute our product principally
through a limited number of specialty distributor and specialty pharmacy providers, collectively, our customers. Our customers
subsequently sell our products to patients and health care providers. We do not believe the loss of one of these customers would
significantly impact the ability to distribute our product as we expect that sales volume would be absorbed evenly by the
remaining customers. Separately, we have arrangements with certain payors and other third parties that provide for government-
mandated and privately-negotiated rebates, chargebacks and discounts.
Product Revenue
Revenue from product sales are recognized when the performance obligation is satisfied, which is when customers obtain
control of our product at a point in time, typically upon delivery. We expense incremental costs of obtaining a contract as and
when incurred if the expected amortization period of the asset that we would have recognized is one year or less.
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Reserves for Variable Consideration
Revenues from product sales are recorded at the net sales price (transaction price), which includes estimates of variable
consideration for which reserves are established and which result from price concessions that include rebates, chargebacks,
discounts, co-pay assistance, estimated product returns and other allowances that are offered within contracts between us and our
customers, health care providers, payors and other indirect customers relating to the sales of our product. These reserves are
based on the amounts earned or to be claimed on the related sales and are classified as reductions of accounts receivable or a
current liability. Where appropriate, these estimates take into consideration a range of possible outcomes which are probability-
weighted for relevant factors such as our historical experience, current contractual and statutory requirements, specific known
market events and trends, industry data and forecasted customer buying and payment patterns. Overall, these reserves reflect our
best estimates of the amount of consideration to which we are entitled based on the terms of the contract. The amount of variable
consideration which is included in the transaction price may be constrained and is included in the net sales price only to the
extent that it is probable that a significant reversal in the amount of the cumulative revenue recognized will not occur in a future
period. Actual amounts of consideration ultimately received may differ from our estimates. If actual results in the future vary
from our estimates, we adjust these estimates, which would affect product revenue and earnings in the period such variances
become known.
Government Rebates. Rebates include mandated discounts under the Medicaid Drug Rebate Program, the Medicare coverage
gap program, the Tricare health program and various European National Health Service, Sick Fund and Clawback programs.
Rebates are amounts owed after the final dispensing of products to a benefit plan participant and are based upon contractual
agreements or legal requirements with the public-sector benefit providers. These reserves are recorded in the same period the
related revenue is recognized, resulting in a reduction of product revenue and the establishment of a current liability which is
included in accrued expenses on the Consolidated Balance Sheets. Our rebate estimates are based upon a range of possible
outcomes that are probability-weighted for the estimated payor mix. The accrual for rebates is based on the expected utilization
from historical data we have accumulated since the Rubraca product launch.
GPO and Payor Rebates. We contract with various private payor organizations and group purchasing organizations (“GPO”),
primarily insurance companies, pharmacy benefit managers and hospitals, for the payment of rebates with respect to utilization of
our products. We estimate these rebates and record such estimates in the same period the related revenue is recognized, resulting
in a reduction of product revenue and the establishment of a current liability.
Chargebacks. Chargebacks are discounts that occur when contracted customers, which currently consist primarily of group
purchasing organizations, Public Health Service (“PHS”) organizations and federal government entities purchasing via the
Federal Supply Schedule, purchase directly from our specialty distributors at a discounted price. The specialty distributor, in turn,
charges back the difference between the price initially paid by the specialty distributor and the discounted price paid to the
specialty distributor by the healthcare provider. These reserves are established in the same period that the related revenue is
recognized, resulting in a reduction of product revenue and accounts receivable. The accrual for specialty distributor chargebacks
is estimated based on known chargeback rates and known sales to specialty distributors adjusted for the estimated utilization by
healthcare providers.
Discounts and Fees. Our payment terms are generally 30 days. Specialty distributors and specialty pharmacies are offered
various forms of consideration, including service fees and prompt pay discounts for payment within a specified period. We
expect these customers will earn prompt pay discounts and therefore, we deduct the full amount of these discounts and service
fees from product sales when revenue is recognized.
Co-pay assistance. Patients who have commercial insurance and meet certain eligibility requirements may receive co-pay
assistance. The intent of this program is to reduce the patient’s out of pocket costs. Liabilities for co-pay assistance are based on
actual program participation provided by third-party administrators at month end.
Returns. Consistent with industry practice, we generally offer customers a right of return limited only to product that will
expire in six months or product that is six months beyond the expiration date. To date, we have had minimal product returns and
we currently do not have an accrual for product returns. We will continue to assess our estimate for product returns based on
additional historical experience.
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For the year ended December 31, 2020, and 2019, we recognized $164.5 million and $143.0 million, respectively, of product
revenue. Based on our policy to expense costs associated with the manufacture of our products prior to regulatory approval,
certain of the costs of Rubraca units recognized as revenue during the year ended December 31, 2017 were expensed prior to the
December 19, 2016 FDA approval, and a minimal amount was included in cost of sales during the year ended December 31,
2017. The majority of product sales were of pre-commercialization inventory in 2017. Cost of sales increased in 2018 in relation
to product revenue as we depleted these inventories.
Product revenue from each of our customers who individually accounted for 10% or more of total revenues, which were all
customers in the U.S. segment, consisted of the following:
Customer A
Customer B
Customer C
Customer D
Customer E
4. Property and Equipment
Property and equipment consisted of the following (in thousands):
Laboratory, manufacturing and office equipment
Leasehold improvements
Furniture and fixtures
Computer hardware and software
Total property and equipment
Less: accumulated depreciation
Total property and equipment, net
December 31, December 31,
2020
21%
14%
18%
11%
10%
2019
25%
20%
15%
12%
10%
December 31,
2020
$ 1,267
17,256
2,782
1,835
23,140
(11,055)
$ 12,085
2019
$ 1,290
16,946
2,805
1,699
22,740
(7,453)
$15,287
Depreciation expense related to property and equipment was approximately $3.0 million, $3.0 million and $2.0 million for the
years ended December 31, 2020, 2019 and 2018, respectively.
5. Fair Value Measurements
Fair value is defined as the exchange price that would be received to sell an asset or paid to transfer a liability (at exit price) in
the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the
measurement date. The three levels of inputs that may be used to measure fair value include:
Level 1: Quoted prices in active markets for identical assets or liabilities. Our Level 1 assets consist of money market
investments. We do not have Level 1 liabilities.
Level 2: Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities in active markets or
other inputs that are observable or can be corroborated by observable market data for substantially the full term of
the assets or liabilities. Our Level 2 assets consist of U.S. treasury securities. We do not have Level 2 liabilities.
Level 3: Unobservable inputs that are supported by little or no market activity. We do not have Level 3 assets or liabilities.
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The following table identifies our assets that were measured at fair value on a recurring basis (in thousands):
Balance Level 1 Level 2 Level 3
December 31, 2020
Assets:
Money market
U.S. treasury securities
Total assets at fair value
December 31, 2019
Assets:
Money market
U.S. treasury securities
Total assets at fair value
$147,921
$147,921
—
$147,921
$147,921
$
—
$
— $ —
— —
— $ —
$ 61,882
189,736
$251,618
$ 61,882
54,910
$116,792
$
134,826
$134,826
— $ —
—
$ —
There were no liabilities that were measured at fair value on a recurring basis as of December 31, 2020.
Financial instruments not recorded at fair value include our convertible senior notes. At December 31, 2020, the carrying
amount of the 2021 Notes was $64.2 million, which represents the aggregate principal amount net of remaining debt issuance
costs, and the fair value was $59.8 million. At December 31, 2020, the carrying amount of the 2024 Notes (2019 Issuance) was
$83.9 million, which represents the aggregate principal amount net of remaining debt issuance costs, and the fair value was $75.4
million. At December 31, 2020, the carrying amount of the 2024 Notes (2020 Issuance) was $56.6 million, which represents the
aggregate principal amount net of remaining debt issuance costs, and the fair value was $49.1 million. At December 31, 2020, the
carrying amount of the 2025 Notes was $294.3 million, which represents the aggregate principal amount net of remaining debt
issuance costs, and the fair value was $211.1 million. The fair value was determined using Level 2 inputs based on the indicative
pricing published by certain investment banks or trading levels of the convertible senior notes, which are not listed on any
securities exchange or quoted on an inter-dealer automated quotation system. See Note 10, Debt for discussion of the convertible
senior notes. The carrying amounts of accounts payable and accrued expenses approximate their fair value due to their short-term
maturities.
6. Available-for-Sale Securities
We did not have available-for-sale securities as of December 31, 2020.
As of December 31, 2019, available-for-sale securities consisted of the following (in thousands):
U.S. treasury securities
Amortized
Cost
134,826
$
Gross
Gross
Unrealized Unrealized
Gains
Losses
Aggregate
Fair
Value
$
— $
— $ 134,826
7. Inventories
The following table presents inventories as of December 31, 2020 and December 31, 2019 (in thousands):
Work-in-process
Finished goods, net
Total inventories
December 31, December 31,
2019
2020
102,507 $ 104,139
32,330
20,433
134,837 $ 124,572
$
$
At December 31, 2020, we had $30.7 million of current inventory and $104.1 million of long-term inventory.
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8. Intangible Assets
At December 31, 2020 and 2019, intangible assets related to capitalized milestones under license agreements consisted of the
following (in thousands):
Intangible asset - milestones
Accumulated amortization
Total intangible asset, net
December 31, December 31,
2020
79,850
(14,107)
65,743
$
$
2019
71,850
(8,930)
62,920
$
$
The increase in our intangible asset – milestones since December 31, 2019 is due to an $8.0 million milestone payment to
Pfizer related to the May 2020 FDA approval. See Note 14, License Agreements for further discussion of this approval.
The estimated useful lives of these intangible assets are based on the estimated remaining patent life of Rubraca and extend
through 2031 in Europe and 2035 in the U.S.
We recorded amortization expense of $5.2 million and $4.8 million related to capitalized milestone payments during the year
ended December 31, 2020 and December 31, 2019, respectively. Amortization expense is included in cost of sales – intangible
asset amortization on the Consolidated Statements of Operations and Comprehensive Loss.
Estimated future amortization expense for intangible assets as of December 31, 2020 is as follows (in thousands):
2021
2022
2023
2024
2025
Thereafter
9. Leases
$ 5,371
5,371
5,371
5,371
5,371
38,888
$ 65,743
At the inception of an arrangement, we determine whether the arrangement is or contains a lease based on the unique facts and
circumstances. Most leases with a term greater than one year are recognized on the balance sheet as right-of-use assets, lease
liabilities and, if applicable, long-term lease liabilities. We elected not to recognize on the balance sheet leases with terms of one
year or less. Lease liabilities and their corresponding right-of-use assets are recorded based on the present value of lease
payments over the expected lease term. The interest rate implicit in lease contracts is typically not readily determinable. As such,
we utilize the appropriate incremental borrowing rate, which is the rate incurred to borrow on a collateralized basis over a similar
term at an amount equal to the lease payments in a similar economic environment. Certain adjustments to the right-of-use asset
may be required for items such as initial direct costs paid or incentives received.
The components of a lease should be split into three categories: lease components (e.g. land, building, etc.), non-lease
components (e.g. common area maintenance, maintenance, consumables, etc.) and non-components (e.g. property taxes,
insurance, etc.). Then the fixed and in-substance fixed contract consideration (including any related to non-components) must be
allocated based on fair values assigned to the lease components and non-lease components.
Our facilities operating leases have lease components, non-lease components and non-components, which we have separated
because the non-lease components and non-components have variable lease payments and are excluded from the measurement of
the lease liabilities. The lease component results in a right-of-use asset being recorded on the balance sheet and amortized as lease
expense on a straight-line basis to the statements of operations.
We lease all of our office facilities in the U.S. and Europe. Leases with an initial term of 12 months or less are not recorded on
the balance sheet; we recognize lease expense for these leases on a straight-line basis over the lease term. Most leases include one
or more options to renew. The exercise of lease renewal options is at our sole discretion. Our
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lease agreements do not contain any material residual value guarantees or material restrictive covenants.
We have a finance lease for certain equipment at the dedicated production train at Lonza, our non-exclusive manufacturer of
the Rubraca API.
The components of lease expense and related cash flows were as follows (in thousands):
Year ended December 31,
2020
Year ended December 31,
2019
Lease cost
Finance lease cost:
Amortization of right-of-use assets
Interest on lease liabilities
Operating lease cost
Short-term lease cost
Variable lease cost
Total lease cost
Operating cash flows from finance
leases
Operating cash flows from operating
leases
Financing cash flows from finance
leases
$
$
$
$
$
1,895
816
4,649
401
2,071
9,832
816
4,649
1,470
$
$
$
$
$
1,898
759
4,003
301
2,261
9,222
759
4,003
1,115
The weighted-average remaining lease term and weighted-average discount rate were as follows:
December 31, 2020 December 31, 2019
Weighted-average remaining lease term (years)
Operating leases
Finance leases
Weighted-average discount rate
Operating leases
Finance leases
6.6
5.0
8%
8%
6.9
6.0
8%
8%
Future minimum commitments due under these lease agreements as of December 31, 2020 are as follows (in thousands):
2021
2022
2023
2024
2025
Thereafter
Present value adjustment
Present value of lease payments
Operating Leases Finance Leases
2,287
2,287
2,287
2,287
2,287
5,796
5,308
4,859
4,868
5,025
9,938
(8,223)
27,571
—
(2,036)
9,399
$
$
$
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Total
8,083
7,595
7,146
7,155
7,312
9,938
(10,259)
36,970
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10. Debt
The following is a summary of our convertible senior notes at December 31, 2020 and 2019 (principal amount in thousands):
2021 Notes
2024 Notes (2019 Issuance)
2024 Notes (2020 Issuance)
2025 Notes
Total
Principal Amount
December 31, 2020
64,418
$
85,782
57,500
300,000
507,700
$
Principal Amount
December 31, 2019
97,188
263,000
—
300,000
660,188
$
$
Interest Rate
2.50%
4.50%
4.50%
1.25%
Due Date
September 15, 2021
August 1, 2024
August 1, 2024
May 1, 2025
2021 Notes
In September 2014, we completed a private placement of $287.5 million aggregate principal amount of 2.5% convertible
senior notes due 2021 (the “2021 Notes”) resulting in net proceeds of $278.3 million after deducting offering expenses. In
accordance with the accounting guidance, the conversion feature did not meet the criteria for bifurcation, and the entire principal
amount was recorded as a long-term liability on the Consolidated Balance Sheets.
The 2021 Notes are governed by the terms of the indenture between the Company, as issuer, and The Bank of New York
Mellon Trust Company, N.A., as trustee. The 2021 Notes are senior unsecured obligations and bear interest at a rate of 2.5% per
year, payable semi-annually in arrears on March 15 and September 15 of each year. The 2021 Notes will mature on
September 15, 2021, unless earlier converted, redeemed or repurchased.
Holders may convert all or any portion of the 2021 Notes at any time prior to the close of business on the business day
immediately preceding the maturity date. Upon conversion, the holders will receive shares of our common stock at an initial
conversion rate of 16.1616 shares per $1,000 in principal amount of 2021 Notes, equivalent to a conversion price of
approximately $61.88 per share. The conversion rate is subject to adjustment upon the occurrence of certain events described in
the indenture. In addition, following certain corporate events that occur prior to the maturity date or upon our issuance of a notice
of redemption, we will increase the conversion rate for holders who elect to convert the 2021 Notes in connection with such a
corporate event or during the related redemption period in certain circumstances.
On or after September 15, 2018, we may redeem the 2021 Notes, at our option, in whole or in part, if the last reported sale
price of our common stock has been at least 150% of the conversion price then in effect for at least 20 trading days (whether or
not consecutive) during any 30 consecutive trading day period ending not more than two trading days preceding the date on
which we provide written notice of redemption at a redemption price equal to 100% of the principal amount of the 2021 Notes to
be redeemed plus accrued and unpaid interest to, but excluding, the redemption date. No sinking fund is provided for the 2021
Notes.
If we undergo a fundamental change, as defined in the indenture, prior to the maturity date of the 2021 Notes, holders may
require us to repurchase for cash all or any portion of the 2021 Notes at a fundamental change repurchase price equal to 100% of
the principal amount of the 2021 Notes to be repurchased, plus accrued and unpaid interest to, but excluding, the fundamental
change repurchase date.
The 2021 Notes rank senior in right of payment to any of our indebtedness that is expressly subordinated in right of payment
to the 2021 Notes; equal in right of payment to all of our liabilities that are not so subordinated; effectively junior in right of
payment to any secured indebtedness to the extent of the value of the assets securing such indebtedness; and structurally junior to
all indebtedness and other liabilities (including trade payables) of our subsidiaries.
In connection with the issuance of the 2021 Notes, we incurred $9.2 million of debt issuance costs, of which $2.0 million of
unamortized debt issuance costs were derecognized in connection with the repurchase of the 2021 Notes. The remaining debt
issuance costs are presented as a deduction from the convertible senior notes on the Consolidated Balance Sheets and are
amortized as interest expense over the expected life of the 2021 Notes using the effective interest method. We determined the
expected life of the debt was equal to the seven-year term of the 2021 Notes.
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In August 2019, we entered into privately negotiated transactions with a limited number of holders to repurchase $190.3
million aggregate principal amount of our outstanding 2021 Notes for an aggregate repurchase price of $171.8 million, including
accrued interest. This repurchase resulted in the recognition of $18.5 million gain on extinguishment of debt.
In April 2020, we entered into a privately negotiated exchange agreement with a holder (“Holder”) of our 2021 Notes,
pursuant to which we issued to such Holder of the 2021 Notes approximately $36.1 million in aggregate principal amount of our
currently outstanding 2024 Notes (2019 Issuance) in exchange for approximately $32.8 million in aggregate principal of 2021
Notes held by such Holder (the “Exchange Transaction”), which resulted in a $3.3 million loss on extinguishment of debt. We did
not receive any cash proceeds from the Exchange Transaction.
2024 Notes (2019 Issuance)
In August 2019, we completed a private placement to qualified institutional buyers of $263.0 million aggregate principal
amount of 4.50% convertible senior notes due 2024 (the “2024 Notes (2019 Issuance)”) resulting in net proceeds of
$254.9 million, after deducting underwriting discounts and commissions and offering expenses. In accordance with the
accounting guidance, the conversion feature did not meet the criteria for bifurcation, and the entire principal amount was
recorded as a long-term liability on the Consolidated Balance Sheets.
The 2024 Notes (2019 Issuance) are governed by the terms of the indenture between the Company, as issuer, and The Bank of
New York Mellon Trust Company, N.A., as trustee. The 2024 Notes (2019 Issuance) are senior unsecured obligations and bear
interest at a rate of 4.50% per year, payable semi-annually in arrears on February 1 and August 1 of each year. The 2024 Notes
(2019 Issuance) will mature on August 1, 2024, unless earlier repurchased or converted.
Holders may convert all or any portion of the 2024 Notes (2019 Issuance) at any time prior to the close of business on the
business day immediately preceding the maturity date. Upon conversion, the holders will receive shares of our common stock at
an initial conversion rate of 137.2213 shares per $1,000 in principal amount of 2024 Notes (2019 Issuance), equivalent to a
conversion price of approximately $7.29 per share. The conversion rate is subject to adjustment upon the occurrence of certain
events described in the indenture. In addition, following certain corporate events that occur prior to the maturity date or upon our
issuance of a notice of redemption, we will increase the conversion rate for holders who elect to convert the 2024 Notes (2019
Issuance) in connection with such a corporate event or during the related redemption period in certain circumstances.
We will not have the right to redeem the 2024 Notes (2019 Issuance) prior to their maturity. If we undergo a fundamental
change, as defined in the indenture, prior to the maturity date of the 2024 Notes (2019 Issuance), holders may require us to
repurchase for cash all or any portion of the 2024 Notes (2019 Issuance) at a fundamental change repurchase price equal to 100%
of the principal amount of the 2024 Notes (2019 Issuance) to be repurchased plus accrued and unpaid interest to, but excluding,
the fundamental change repurchase date. No sinking fund is provided for the 2024 Notes (2019 Issuance).
The 2024 Notes (2019 Issuance) rank senior in right of payment to any of our indebtedness that is expressly subordinated in
right of payment to the 2024 Notes (2019 Issuance); equal in right of payment to all of our liabilities that are not so subordinated,
including the 2021 Notes and 2025 Notes; effectively junior in right of payment to any secured indebtedness to the extent of the
value of the assets securing such indebtedness, including our borrowing under the Sixth Street financing agreement; and
structurally junior to all indebtedness and other liabilities (including trade payables) of our subsidiaries.
In connection with the issuance of the 2024 Notes (2019 Issuance), we incurred $8.0 million of debt issuance costs. The debt
issuance costs are presented as a deduction from the convertible senior notes on the Consolidated Balance Sheets and are
amortized as interest expense over the expected life of the 2024 Notes (2019 Issuance) using the effective interest method. We
determined the expected life of the debt was equal to the five-year term of the 2024 Notes (2019 Issuance).
In January 2020, we completed a registered direct offering of an aggregate 17,777,679 shares of our common stock at a price
of $9.25 per share to a limited number of holders of our 2024 Notes (2019 Issuance). We used the proceeds of the share offering
to repurchase from such holders an aggregate of $123.4 million principal amount of 2024 Notes (2019 Issue) in privately
negotiated transactions. In addition, we paid customary fees and expenses in connection with the
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transactions. As a result, $3.6 million of unamortized debt issuance costs were derecognized and we recognized a $7.8 million
loss on the transactions.
In April 2020, we completed the Exchange Transaction discussed in the 2021 Notes section above.
The additional 2024 Notes (2019 Issuance) issued in the Exchange Transaction were issued as additional notes under that
certain Indenture, dated as of August 13, 2019 (the “Indenture”), by and between the Company and The Bank of New York
Mellon Trust Company, N.A., as trustee, and have substantially identical terms to our currently outstanding 2024 Notes (2019
Issuance), except that the additional 2024 Notes (2019 Issuance) will accrue interest from February 1, 2020 and the initial interest
payment date on the additional 2024 Notes (2019 Issuance) was August 1, 2020. The Holder paid to the Company accrued
interest on the additional 2024 Notes (2019 Issue) from February 1, 2020 to and including April 20, 2020. The additional 2024
Notes (2019 Issuance) will be treated as a single series of securities with the currently outstanding 2024 Notes (2019 Issuance).
In April and May 2020, approximately $24.3 million in principal amount of 2024 Notes (2019 Issuance) were converted into
3,331,870 shares of our common stock at the conversion rate of 137.2213 shares per $1,000 in principal amount of 2024 Notes
(2019 Issuance).
In November 2020, we entered into a privately negotiated exchange and purchase agreement with a holder of our 2024 Notes
(2019 Issuance). Pursuant to the agreement, in exchange for approximately $64.8 million aggregate principal amount of 2024
Notes (2019 Issuance) held by the holder, we agreed to issue to the holder a number shares of our common stock (the
“Exchanged Shares”) utilizing an exchange ratio that is based in part on the daily volume-weighted average prices (“VWAPs”)
per share of our common stock during a seven-day pricing period following execution of the agreement.
In addition, pursuant to the agreement, we sold to the holder $57.5 million aggregate principal amount of a new series of
4.50% Convertible Senior Notes due 2024 (the “2024 Notes (2020 Issuance)”) at a purchase price of $1,000 per $1,000 principal
amount thereof.
The number of Exchanged Shares was calculated utilizing an exchange ratio that is based in part on the average VWAPs of
our common stock (subject to a floor) during a seven-day pricing period beginning on November 5, 2020 and ending on, and
including, November 13, 2020. In November 2020, we issued 15,112,848 Exchanged Shares pursuant to the debt exchange
transaction. As a result, $1.4 million of unamortized debt issuance costs were derecognized and we recognized a $27.3 million
loss on the transactions.
2024 Notes (2020 Issuance)
The 2024 Notes (2020 Issuance) are governed by the terms of the indenture between the Company, as issuer, and The Bank of
New York Mellon Trust Company, N.A., as trustee. The 2024 Notes (2020 Issuance) are senior unsecured obligations and bear
interest at a rate of 4.50% per year, payable semi-annually in arrears on February 1 and August 1 of each year. The 2024 Notes
(2020 Issuance) will mature on August 1, 2024, unless earlier repurchased or converted.
Holders may convert all or any portion of the 2024 Notes (2020 Issuance) at any time prior to the close of business on the
business day immediately preceding the maturity date. Upon conversion, the holders will receive shares of our common stock at
an initial conversion rate of 160.3334 shares per $1,000 in principal amount of 2024 Notes (2020 Issuance), equivalent to a
conversion price of approximately $6.24 per share. The initial conversion price represents a premium of approximately 10% to
the last reported sale price of $5.67 per share on November 4, 2020. The conversion rate is subject to adjustment upon the
occurrence of certain events described in the indenture. In addition, following certain corporate events that occur prior to the
maturity date or upon our issuance of a notice of redemption, we will increase the conversion rate for holders who elect to
convert the 2024 Notes (2020 Issuance) in connection with such a corporate event or during the related redemption period in
certain circumstances.
We will not have the right to redeem the 2024 Notes (2020 Issuance) prior to their maturity. If we undergo a fundamental
change, as defined in the indenture, prior to the maturity date of the 2024 Notes (2020 Issuance), holders may require us to
repurchase for cash all or any portion of the 2024 Notes (2020 Issuance) at a fundamental change repurchase price equal to 100%
of the principal amount of the 2024 Notes (2020 Issuance) to be repurchased, plus
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accrued and unpaid interest to, but excluding, the fundamental change repurchase date. No sinking fund is provided for the 2024
Notes (2020 Issuance).
The 2024 Notes (2020 Issuance) rank senior in right of payment to any of our indebtedness that is expressly subordinated in
right of payment to the 2024 Notes (2020 Issuance); equal in right of payment to all of our liabilities that are not so subordinated,
including the 2021 Notes, 2024 Notes (2019 Issuance) and 2025 Notes; effectively junior in right of payment to any secured
indebtedness to the extent of the value of the assets securing such indebtedness, including our borrowing under the Sixth Street
financing agreement; and structurally junior to all indebtedness and other liabilities (including trade payables) of our subsidiaries.
In connection with the issuance of the 2024 Notes (2020 Issuance), we incurred $0.9 million of debt issuance costs. The debt
issuance costs are presented as a deduction from the convertible senior notes on the Consolidated Balance Sheets and are
amortized as interest expense over the expected life of the 2024 Notes (2020 Issuance) using the effective interest method. We
determined the expected life of the debt was equal to the four-year term of the 2024 Notes (2020 Issuance).
2025 Notes
In April 2018, we completed an underwritten public offering of $300.0 million aggregate principal amount of 1.25%
convertible senior notes due 2025 (the “2025 Notes”) resulting in net proceeds of $290.9 million, after deducting underwriting
discounts and commissions and offering expenses. In accordance with the accounting guidance, the conversion feature did not
meet the criteria for bifurcation, and the entire principal amount was recorded as a long-term liability on the Consolidated
Balance Sheets.
The 2025 Notes are governed by the terms of the indenture between the Company, as issuer, and The Bank of New York
Mellon Trust Company, N.A., as trustee, as supplemented by the terms of that certain first supplemental indenture thereto. The
2025 Notes are senior unsecured obligations and bear interest at a rate of 1.25% per year, payable semi-annually in arrears on
May 1 and November 1 of each year. The 2025 Notes will mature on May 1, 2025, unless earlier converted, redeemed or
repurchased.
Holders may convert all or any portion of the 2025 Notes at any time prior to the close of business on the business day
immediately preceding the maturity date. Upon conversion, the holders will receive shares of our common stock at an initial
conversion rate of 13.1278 shares per $1,000 in principal amount of 2025 Notes, equivalent to a conversion price of
approximately $76.17 per share. The conversion rate is subject to adjustment upon the occurrence of certain events described in
the indenture. In addition, following certain corporate events that occur prior to the maturity date or upon our issuance of a notice
of redemption, we will increase the conversion rate for holders who elect to convert the 2025 Notes in connection with such a
corporate event or during the related redemption period in certain circumstances.
On or after May 2, 2022, we may redeem the 2025 Notes, at our option, in whole or in part, if the last reported sale price of
our common stock has been at least 150% of the conversion price then in effect for at least 20 trading days (whether or not
consecutive) during any 30 consecutive trading day period ending not more than two trading days preceding the date on which
we provide written notice of redemption at a redemption price equal to 100% of the principal amount of the 2025 Notes to be
redeemed plus accrued and unpaid interest to, but excluding, the redemption date. No sinking fund is provided for the 2025
Notes.
If we undergo a fundamental change, as defined in the indenture, prior to the maturity date of the 2025 Notes, holders may
require us to repurchase for cash all or any portion of the 2025 Notes at a fundamental change repurchase price equal to 100% of
the principal amount of the 2025 Notes to be repurchased, plus accrued and unpaid interest to, but excluding, the fundamental
change repurchase date.
The 2025 Notes rank senior in right of payment to any of our indebtedness that is expressly subordinated in right of payment
to the 2025 Notes; equal in right of payment to all of our liabilities that are not so subordinated, including the 2021 Notes;
effectively junior in right of payment to any secured indebtedness to the extent of the value of the assets securing such
indebtedness; and structurally junior to all indebtedness and other liabilities (including trade payables) of our subsidiaries.
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In connection with the issuance of the 2025 Notes, we incurred $9.1 million of debt issuance costs. The debt issuance costs are
presented as a deduction from the convertible senior notes on the Consolidated Balance Sheets and are amortized as interest
expense over the expected life of the 2025 Notes using the effective interest method. We determined the expected life of the debt
was equal to the seven-year term of the 2025 Notes.
As of December 31, 2020, and 2019, the balance of unamortized debt issuance costs related to the convertible senior notes was
$8.7 million and $15.4 million, respectively.
Maturities of our convertible notes consisted of the following as of December 31, 2020 (in thousands):
2021
2022
2023
2024
2025
Thereafter
Less debt issuance costs
Current portion
Long-term portion
$
$
64,418
—
—
143,282
300,000
—
507,700
(8,656)
(64,198)
434,846
Sixth Street Financing Agreement
On May 1, 2019, we entered into a financing agreement (the “Financing Agreement”) with certain affiliates of Sixth Street
Partners, LLC (“Sixth Street”) in which we plan to borrow from Sixth Street amounts required to reimburse our actual costs and
expenses incurred during each fiscal quarter (limited to agreed budgeted amounts), as such expenses are incurred, related to the
ATHENA clinical trial, in an aggregate amount of up to $175 million (the amount actually borrowed, the “Borrowed Amount”).
ATHENA is our largest clinical trial, with a planned target enrollment of 1,000 patients across more than 270 sites in at
least 25 countries. The Clovis-sponsored phase 3 ATHENA study in advanced ovarian cancer is the first-line maintenance
treatment setting evaluating Rubraca plus nivolumab (PD-1 inhibitor), Rubraca, nivolumab and a placebo in newly-diagnosed
patients who have completed platinum-based chemotherapy. This study initiated in the second quarter of 2018 and completed
enrollment during the second quarter of 2020.
We incur borrowings under the Financing Agreement on a quarterly basis, beginning with such expenses incurred during the
quarter ended March 31, 2019 and ending generally on the earliest to occur of (i) the termination of the ATHENA Trial, (ii) the
date of completion of all activities under the ATHENA Trial Clinical Study Protocol, (iii) the date on which we pay the
Discharge Amount (as defined in the Financing Agreement), (iv) the date of the occurrence of a change of control of us (or a sale
of all or substantially all of our assets related to Rubraca) or our receipt of notice of certain breaches by us of our obligations
under material in-license agreements related to Rubraca and (v) September 30, 2022.
We are obligated to repay on a quarterly basis, beginning on the earliest to occur of (i) the termination of the ATHENA Trial,
(ii) the approval by the FDA of an update to the label portion of the Rubraca new drug application (“NDA”) to include in such
label the treatment of an indication resulting from the ATHENA Trial, (iii) the date on which we determine that the results of the
ATHENA Trial are insufficient to achieve such an expansion of the Rubraca label to cover an indication based on the ATHENA
Trial and (iv) September 30, 2022 (the “Repayment Start Date”).
●
●
9.75% (which rate may be increased incrementally up to approximately 10.25% in the event the Borrowed Amount
exceeds $166.5 million) of the direct Rubraca net sales recorded by us and our subsidiaries worldwide and our future
out-licensees in the United States, if any, during such quarter;
19.5% of any royalty payments received by us and our subsidiaries during such quarter based on the sales of Rubraca
by our future out-licensees outside the United States, if any; and
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●
19.5% of any other amounts received by us and our subsidiaries in connection with any other commercialization
arrangement for Rubraca, including any upfront and milestone payments and proceeds of infringement claims (which
payments are not subject to the caps described below).
Quarterly payments are capped at $8.5 million, unless the label portion of the Rubraca NDA is expanded by the FDA to
include such label the treatment of an indication resulting from the ATHENA Trial, in which case the quarterly payment is
capped at $13.5 million. In the event the aggregate Borrowed Amount exceeds $166.5 million, such quarterly limits will be
incrementally increased to a maximum of approximately $8.94 million and $14.19 million, respectively. The maximum amount
required to be repaid under the agreement is two times the aggregate Borrowed Amount, which may be $350 million in the event
we borrow the full $175 million under the Financing Agreement.
In the event we have not made payments on or before December 30, 2025 equal to at least the Borrowed Amount, we are
required to make a lump sum payment in an amount equal to such Borrowed Amount less the aggregate of all prior quarterly
payments described above. All other payments are contingent on the performance of Rubraca. There is no final maturity date on
the Financing Agreement.
Our obligations under the Financing Agreement are secured under a Pledge and Security agreement by a first priority security
interest in all of our assets related to Rubraca, including intellectual property rights and a pledge of the equity of our wholly
owned subsidiaries, Clovis Oncology UK Limited and Clovis Oncology Ireland Limited. In addition, the obligations are
guaranteed by Clovis Oncology UK Limited and Clovis Oncology Ireland Limited, secured by a first priority security interest in
all the assets of those subsidiaries.
Pursuant to the Financing Agreement, we have agreed to certain limitations on our operations, including limitations on making
certain restricted junior payments, including payment of dividends, limitation on liens and certain limitations on the ability of our
non-guarantor subsidiaries to own certain assets related to Rubraca and to incur indebtedness.
We may terminate the Financing Agreement at any time by paying the lenders an amount (the “Discharge Amount”) equal to
the sum of (a) (A) the greater of (x) the Borrowed Amount plus (i) if such date is during calendar year 2019, $35.0 million or
(ii) if such date is during calendar year 2020 or thereafter, $50.0 million and (y) (i) if such date is prior to the Repayment Start
Date, 1.75 times the Borrowed Amount or (ii) if such date is after the Repayment Start Date, 2.00 times the Borrowed Amount
minus (B) the aggregate amount of all quarterly payments previously paid to the lenders plus (b) all other obligations which have
accrued but which have not been paid under the loan documents, including expense reimbursement.
In the event of (i) a change of control of us, we must pay the Discharge Amount to the lenders and (ii) an event of default
under the Financing Agreement (which includes, among other events, breaches or defaults under or terminations of our material
in-license agreements related to Rubraca and defaults under our other material indebtedness), the lenders have the right to declare
the Discharge Amount to be immediately due and payable.
For the year ended December 31, 2020, we recorded $110.9 million as a long-term liability on the Consolidated Balance
Sheets and future quarterly draws will be recorded as a long-term liability on the Consolidated Balance Sheets. In connection
with the transaction, we incurred $1.8 million of debt issuance costs. The debt issuance costs are presented as a deduction from
the Sixth Street financing liability on the Consolidated Balance Sheets and are amortized as interest expense over the expected
life of the Financing Agreement using the straight-line method. As of December 31, 2020, the balance of unamortized debt
issuance costs was $1.5 million.
For the year ended December 31, 2020, we used an effective interest rate of 14.6%. For subsequent periods, we will use the
prospective method whereby a new effective interest rate is determined based on the revised estimate of remaining cash flows.
The new rate is the discount rate that equates the present value of the revised estimate of remaining cash flows with the carrying
amount of the debt, and it will be used to recognize interest expense for the remaining periods. Under this method, the effective
interest rate is not constant, and any change in expected cash flows is recognized prospectively as an adjustment to the effective
yield.
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Expected maturities of our Financing Agreement consisted of the following as of December 31, 2020 (in thousands):
2021
2022
2023
2024
2025
Thereafter
Less debt issuance costs
Current portion
Long-term portion
$
$
—
8,934
41,091
45,532
16,820
—
112,377
(1,460)
—
110,917
The following table sets forth total interest expense recognized during the years ended December 31, 2020, 2019 and 2018 (in
thousands):
Interest on convertible notes
Amortization of debt issuance costs
Debt issuance cost derecognized related to convertible debt
transactions
Interest on finance lease
Interest on borrowings under ATHENA financing agreement
Accretion of interest on milestone liability
Interest on capital lease liability
Other interest
Total interest expense
11. Stockholders’ Equity
Common Stock
Year ended December 31,
2019
$ 13,680
2,858
2020
$ 11,934
2,672
2018
9,812
2,178
$
4,345
816
10,624
—
—
117
$ 30,508
—
759
1,997
—
—
111
$ 19,405
—
—
—
977
216
—
$ 13,183
In April 2018, we sold 1,837,898 shares of our common stock in a public offering at $54.41 per share. The net proceeds from
the offering were $93.9 million, after deducting underwriting discounts and commissions and offering expenses.
In May 2020, we sold 11,090,000 shares of our common stock in a public offering at $8.05 per share. The net proceeds from
the offering were $82.8 million, after deducting underwriting discounts and commissions and offering expenses.
The holders of common stock are entitled to one vote per share on all matters to be voted upon by our stockholders. Subject to
the preferences that may be applicable to any outstanding shares of preferred stock, the holders of common stock are entitled to
receive ratably such dividends, if any, as may be declared by our board of directors.
Accumulated Other Comprehensive Loss
Accumulated other comprehensive loss consists of changes in foreign currency translation adjustments, which includes
changes in a subsidiary’s functional currency, and unrealized gains and losses on available-for-sale securities.
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The changes in accumulated balances related to each component of other comprehensive income (loss) are summarized as
follows (in thousands):
Foreign Currency
Translation Adjustments
Unrealized
Total Accumulated
(Losses) Gains Other Comprehensive Loss
Balance at December 31,
2018
Other comprehensive
income (loss)
Total before tax
Tax effect
Balance at December 31,
2019
Other comprehensive
income (loss)
Total before tax
Tax effect
Balance at December 31,
2020
$
(44,460) $
(174) $
(272)
(44,732)
—
(44,732)
567
(44,165)
—
41
(133)
—
(133)
(6)
(139)
—
$
(44,165) $
(139) $
(44,634)
(231)
(44,865)
—
(44,865)
561
(44,304)
—
(44,304)
The period change in each of the periods was primarily due to the foreign currency translation of the goodwill and deferred
income taxes associated with the acquisition of EOS in November 2013. There were no reclassifications out of accumulated other
comprehensive loss in the years ended December 31, 2020, 2019 and 2018.
Effective October 1, 2018, substantially all assets and activities related to EOS were transferred from our Italian subsidiary to
the U.S. This had the impact of changing the functional currency of goodwill from the Euro to USD. Therefore, the balance of
goodwill will no longer change due to foreign currency gains and losses.
12. Share-Based Compensation
Stock Options
In April 2020, our board of directors approved the 2020 Stock Incentive Plan (the “2020 Plan”), which became effective upon
approval. The 2020 Plan provides for the grant of nonqualified stock options, stock appreciation rights, restricted stock, restricted
stock units, performance awards and other share-based awards to our employees and directors (collectively, “awards”). Common
shares authorized for issuance under the 2020 Plan were 6,470,00 at December 31, 2020, which represents the initial reserve.
Stock options granted vest ratably over either a one-year period or three-year period for Board of Director grants. Employee stock
options generally vest over a three- or four-year period with 33% or 25%, respectively, of the options cliff-vesting after year one
and the remaining options vesting ratably over each subsequent month. All stock options expire 10 years from the date of grant.
In August 2011, our board of directors approved the 2011 Stock Incentive Plan (the “2011 Plan”), which became effective
upon the closing of our initial public offering in November 2011. The 2011 Plan provides for the granting of incentive and
nonqualified stock options, stock appreciation rights, restricted stock, restricted stock units, performance awards and other share-
based awards to our employees and directors. Stock options granted vest ratably over either a one-year period or three-year
period for Board of Director grants. Employee stock options generally vest over a four-year period with 25% of the options cliff-
vesting after year one and the remaining options vesting ratably over each subsequent month. All stock options expire 10 years
from the date of grant.
The adoption of the 2020 Plan did not affect the terms and conditions of any outstanding awards granted under the 2011 Plan.
Upon the adoption of the 2020 Plan, no future grants will be granted under the 2011 Plan, but the 2011 Plan will remain in effect
with respect to outstanding awards granted thereunder.
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Share-based compensation expense for the years ended December 31, 2020, 2019 and 2018, respectively, was recognized in
the accompanying Consolidated Statements of Operations and Comprehensive Loss as follows (in thousands):
Research and development
Selling, general and administrative
Total share-based compensation expense
Year ended December 31,
2019
$25,838
28,466
$54,304
2018
$ 20,489
28,601
$ 49,090
2020
$25,577
25,217
$50,794
We did not recognize a tax benefit related to share-based compensation expense during the years ended December 31, 2020,
2019 and 2018 as we maintain net operating loss carryforwards and have established a valuation allowance against the entire net
deferred tax asset as of December 31, 2020.
The following table summarizes the activity relating to our options to purchase common stock:
Outstanding at December 31, 2019
Granted
Exercised
Forfeited
Outstanding at December 31, 2020
Vested and expected to vest at December 31, 2020
Vested and exercisable at December 31, 2020
Number of
Options
6,287,025
980,592
(117,932)
(649,016)
6,500,669
6,371,758
5,026,455
Weighted
Average
Exercise
Price
$ 42.24
7.35
3.23
41.15
$ 37.79
$ 38.24
$ 43.87
Weighted
Average
Remaining
Contractual
Term (Years)
Aggregate
Intrinsic
Value
(Thousands)
5.6
5.5
4.7
$
$
$
127
118
31
The aggregate intrinsic value in the table above represents the pretax intrinsic value, based on our closing stock price of $4.80
as of December 31, 2020, which would have been received by the option holders had all option holders with in-the-money
options exercised their options as of that date.
The following table summarizes information about our stock options as of and for the years ended December 31, 2020, 2019
and 2018 (in thousands, except weighted-average grant date fair value per share):
Weighted-average grant date fair value per share
Intrinsic value of options exercised
Cash received from stock option exercises
Year ended December 31,
2020 2019 2018
$ 5.67
$ 381
$ 236
$ 13.53
$ 1,525
$ 1,361
$ 32.09
$ 1,714
$ 1,869
As of December 31, 2020, the unrecognized share-based compensation expense related to unvested options, adjusted for
expected forfeitures, was $18.1 million and the estimated weighted-average remaining vesting period was 1.5 years.
The fair value of each share-based award is estimated on the grant date using the Black-Scholes option pricing model based
upon the weighted-average assumptions provided in the following table:
Dividend yield
Volatility (a)
Risk-free interest rate (b)
Expected term (years) (c)
(a) Volatility: The expected volatility was estimated using our historical data.
F-30
2020
—
99 %
Year ended December 31,
2018
2019
—
—
88 %
93 %
0.49 % 1.67 % 2.92 %
5.9
5.9
6.0
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(b) Risk-free interest rate: The rate is based on the yield on the grant date of a zero-coupon U.S. Treasury bond whose maturity
period approximates the option’s expected term.
(c) Expected term: The expected term of the award was estimated using our historical data.
The total fair value of stock options vested during the years ended December 31, 2020, 2019 and 2018 was $22.4 million,
$32.8 million and $43.3 million, respectively.
Restricted Stock
Beginning in 2016, we issued restricted stock units (“RSUs”) to certain employees under the 2011 Plan and 2020 Plan. The
RSUs vest either (i) over two years, with 50% vesting one year from the date of grant and the remaining 50% vesting two years
from the date of grant or (ii) over four years, with 25% vesting one year from the date of grant and the remaining 75% vesting
ratably each subsequent quarter over the following three years, as defined in the grant agreement. Vested RSUs are payable in
shares of our common stock at the end of the vesting period. RSUs are measured based on the fair value of the underlying stock
on the grant date. The minimum statutory tax on the value of common stock shares issued to employees upon vesting are paid by
us through the sale of registered shares of our common stock.
The following table summarizes the activity related to our unvested RSUs:
Unvested at December 31, 2019
Granted
Vested
Forfeited
Unvested at December 31, 2020
Expected to vest after December 31, 2020
Number of
Units
2,171,347
2,441,804
(1,012,699)
(636,905)
2,963,547
2,862,148
$
$
Weighted
Average
Grant Date
Fair Value
$
28.37
8.21
28.85
15.51
14.36
14.09
As of December 31, 2020, the unrecognized share-based compensation expense related to RSUs, adjusted for expected
forfeitures, was $33.6 million and the estimated weighted-average remaining vesting period was 2.2 years.
Common Stock Reserved for Issuance
As of December 31, 2020, we reserved shares of common stock for future issuance as follows:
2009 Equity Incentive Plan
2011 Stock Incentive Plan
2020 Stock Incentive Plan
2011 Employee Stock Purchase Plan
Total
Employee Stock Purchase Plan
Available for
Grant
or Future
Issuance
Total Shares of
Common Stock
Reserved
Common Stock
Outstanding
64,522
8,878,976
520,718
—
9,464,216
—
—
5,949,282
361,656
6,310,938
64,522
8,878,976
6,470,000
361,656
15,775,154
In August 2011, our board of directors approved the Clovis Oncology, Inc. 2011 Employee Stock Purchase Plan (the
“Purchase Plan”). Each year, on the date of our annual meeting of stockholders and at the discretion of our board of directors, the
amount of shares reserved for issuance under the Purchase Plan may be increased by up to the lesser of (1) a number of additional
shares of our common stock representing 1% of our then-outstanding shares of common stock, (2) 344,828 shares of our common
stock and (3) a lesser number of shares as approved by the Board. The Purchase Plan provides for consecutive six-month offering
periods, during which participating employees may elect to have up to 10% of their compensation withheld and applied to the
purchase of common stock at the end of each offering period. The purchase price of the common stock is 85% of the lower of the
fair value of a share of common stock on the first trading date of each offering period or the fair value of a share of common
stock on the last trading day of the
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offering period. The Purchase Plan will terminate on August 24, 2021, the tenth anniversary of the date of initial adoption of the
Purchase Plan. We sold 283,588 and 175,634 shares to employees in 2020 and 2019, respectively. There were 361,656 shares
available for sale under the Purchase Plan as of December 31, 2020. The weighted-average estimated grant date fair value of
purchase awards under the Purchase Plan during the years ended December 31, 2020 and 2019 was $4.63 and $6.60 per share,
respectively. The total share-based compensation expense recorded as a result of the Purchase Plan was approximately $1.1
million, $1.0 million and $0.9 million during the years ended December 31, 2020, 2019 and 2018, respectively.
The fair value of purchase awards granted to our employees during the years ended December 31, 2020, 2019 and 2018 was
estimated using the Black-Scholes option pricing model based upon the weighted-average assumptions provided in the following
table:
Dividend yield
Volatility (a)
Risk-free interest rate (b)
Expected term (years) (c)
2020
Year ended December 31,
2018
2019
—
—
—
51 %
79 %
138 %
0.90 % 2.20 % 1.90 %
0.5
0.5
0.5
(a) Volatility: The expected volatility was estimated using our historical data.
(b) Risk-free interest rate: The rate is based on the U.S. Treasury yield in effect at the time of grant with terms similar to the
contractual term of the purchase right.
(c) Expected term: The expected life of the award represents the six-month offering period for the Purchase Plan.
13. Commitments and Contingencies
Manufacture and Services Agreement Commitments
On October 3, 2016, we entered into a Manufacturing and Services Agreement (the “Agreement”) with a non-exclusive third-
party supplier for the production of the active ingredient for Rubraca. Under the terms of the Agreement, we will provide the
third-party supplier a rolling forecast for the supply of the active ingredient in Rubraca that will be updated by us on a quarterly
basis. We are obligated to order material sufficient to satisfy an initial quantity specified in a forecast. In addition, the third-party
supplier has constructed, in its existing facility, a production train that will be exclusively dedicated to the manufacture of the
Rubraca active ingredient. We made scheduled capital program fee payments toward capital equipment and other costs associated
with the construction of the dedicated production train. Beginning in the fourth quarter of 2018, once the facility was operational,
we were obligated to pay a fixed facility fee each quarter for the duration of the Agreement, which expires on December 31,
2025, unless extended by mutual consent of the parties. As of December 31, 2020, $68.1 million of purchase commitments
remain under the Agreement.
At the time we entered into the Agreement, we evaluated the Agreement as a whole and bifurcated into lease and non-lease
components, which consisted of an operating lease of warehouse space, capital lease of equipment, purchase of leasehold
improvements and manufacturing costs based upon the relative fair values of each of the deliverables. During October 2018, the
production train was placed into service and we recorded the various components of the Agreement.
Legal Proceedings
We and certain of our officers were named as defendants in several lawsuits, as described below. We cannot reasonably
predict the outcome of these legal proceedings, nor can we estimate the amount of loss or range of loss, if any, that may result.
An adverse outcome in these proceedings could have a material adverse effect on our results of operations, cash flows or
financial condition.
Rociletinib-Related Litigation
Following Clovis’ regulatory announcement in November 2015 of adverse developments in its ongoing clinical trials for
rociletinib, Clovis and certain of its current and former executives were named in various securities lawsuits, the largest of which
was a putative class action lawsuit in the District of Colorado (the “Medina Action”) which was settled on October 26, 2017 (the
“Medina Settlement”). The remaining actions are discussed below.
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In March 2017, two putative shareholders of the Company, Macalinao and McKenry (the “Derivative Plaintiffs”), filed
shareholder derivative complaints against certain directors and officers of the Company in the Court of Chancery of the State of
Delaware. On May 4, 2017, the Macalinao and McKenry actions were consolidated for all purposes in a single proceeding under
the caption In re Clovis Oncology, Inc. Derivative Litigation, Case No, 2017-0222 (the “Consolidated Derivative Action”).
On May 18, 2017, the Derivative Plaintiffs filed a Consolidated Verified Shareholder Derivative Complaint (the
“Consolidated Derivative Complaint”). The Consolidated Derivative Complaint generally alleged that the defendants breached
their fiduciary duties owed to the Company by allegedly causing or allowing misrepresentations of the Company’s business
operations and prospects, failing to ensure that the TIGER-X clinical trial was being conducted in accordance with applicable
rules, regulations and protocols, and engaging in insider trading. The Consolidated Derivative Complaint sought, among other
things, an award of money damages.
On July 31, 2017, the defendants filed a motion to dismiss the Consolidated Derivative Complaint. Plaintiffs filed an
opposition to the motion to dismiss on August 31, 2017, and the defendants filed a reply in further support of the motion to
dismiss on September 26, 2017.
While the motion to dismiss remained pending, on November 19, 2018, Plaintiffs filed a motion for leave to file a
supplemental consolidated complaint, and on November 20, 2018, the Court granted that motion. On November 27, 2018,
Plaintiffs filed their supplemental complaint (the “Supplemental Derivative Complaint”), which adds allegations concerning the
Company’s, Mr. Mahaffy’s and Mr. Mast’s settlements with the United States Securities and Exchange Commission. Pursuant to
a briefing schedule entered by the Court, the defendants filed a supplemental motion to dismiss the Supplemental Derivative
Complaint on February 6, 2019; plaintiffs filed an opposition brief on February 22, 2019; and the defendants filed a reply brief on
March 5, 2019. The Court held oral arguments on the defendants’ motions to dismiss on June 19, 2019. At the oral arguments, the
Court ordered the parties to submit supplemental letter briefs on the motion to dismiss.
On October 1, 2019, Vice Chancellor Joseph R. Slights III of the Delaware Chancery Court, issued a Memorandum Opinion
granting in part and denying in part defendants’ motions to dismiss. The Supplemental Derivative Complaint was dismissed as to
Plaintiffs’ derivative claims for unjust enrichment and insider trading. The Court allowed Plaintiffs’ remaining derivative claim
for breach of fiduciary duty to proceed. Defendants filed an answer to the Supplemental Derivative Complaint on December 27,
2019.
On December 17, 2019, the parties participated in a mediation, which did not result in a settlement. On December 22, 2019,
the Company’s board of directors formed a Special Litigation Committee (the “SLC”) to conduct an investigation of the claims
asserted in the Supplemental Derivative Complaint. On February 18, 2020, the SLC moved to stay all proceedings in the
Consolidated Derivative Action pending completion of its investigation. Plaintiffs filed their opposition to the motion to stay on
March 3, 2020 and the SLC filed its reply on March 13, 2020. On May 12, 2020, after hearing oral argument, Vice Chancellor
Slights granted the SLC’s motion to stay proceedings until September 18, 2020 so that the SLC may complete its investigation.
On September 11, 2020, Vice Chancellor Slights granted the parties’ request to extend the stay until October 31, 2020, to allow
the SLC further time to complete its investigation. On October 26, 2020, Vice Chancellor Slights granted the parties’ request to
further extend the stay until November 15, 2020. On November 13, 2020, vice Chancellor Slights granted the parties’ request to
further extend the stay until December 15, 2020.
On December 16, 2020, the SLC filed a report (the “SLC Report”) containing the findings of its investigation. The SLC
Report concludes that the claims asserted in the Consolidated Derivative Action lack merit. Specifically, the SLC Report finds
that the defendants did not breach their fiduciary duties in connection with the Company’s TIGER-X clinical trial. Accordingly,
on the same date that the SLC Report was filed, the SLC filed a motion to terminate the Consolidated Derivative Action in
Delaware Chancery Court. A briefing schedule on the motion to terminate has not yet been set.
While the motion to terminate remains pending before Vice Chancellor Slights, the Company does not believe this litigation
will have a material impact on its financial position or results of operations.
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European Patent Opposition
Two European patents in the rucaparib camsylate salt/polymorph patent family (European Patent 2534153 and its divisional
European Patent 3150610) were opposed. In particular, opposition notices against European Patent 2534153 were filed by two
parties on June 20, 2017. During an oral hearing that took place on December 4, 2018, the European Patent Office’s Opposition
Division maintained European Patent 2534153 in amended and narrowed form with claims to certain crystalline forms of
rucaparib camsylate, including, but not limited to, rucaparib S-camsylate Form A, the crystalline form in Rubraca. Clovis and one
opponent, Hexal AG, appealed the written decision of the European Opposition Division and filed reply appeal briefs in early
November 2019. An opposition against European Patent 3150610 was filed by Generics (UK) Limited on April 30, 2020 on
grounds similar to those raised in the opposition notices against European Patent 2534153, which grounds are common in such
proceedings. Moreover, these grounds of opposition, as well as documents based on which lack of patentability has been alleged,
were considered by the European Patent Office during the examination stage, and the claims were deemed to comply with the
applicable law when granting the patent. Clovis responded to the opposition notice in European Patent 3150610 on January 8,
2021, amending the claims to be directed to the use of rucaparib maleate in a method of inhibiting PARP activity or treating
cancer. A preliminary opinion and summons to oral proceedings were issued on January 26, 2021. The oral hearing is scheduled
for November 18, 2021. The preliminary opinion provides a non-binding indication of the Opposition Division’s initial view
based on the documents that have thus far been submitted, which agrees with our positions on a number of grounds of opposition
and agrees with an objection made by the opponent, but only with respect to some of the claims. As part of the opposition
proceedings, we have the opportunity to submit further arguments and pursue alternative claims in the form of auxiliary requests.
While the ultimate results of patent challenges can be difficult to predict, it is our view that a number of factors support
patentability, and we believe a successful challenge of all claims would be difficult.
14. License Agreements
Rubraca
In June 2011, we entered into a license agreement with Pfizer to obtain the exclusive global rights to develop and
commercialize Rubraca. The exclusive rights are exclusive even as to Pfizer and include the right to grant sublicenses. Pursuant
to the terms of the license agreement, we made a $7.0 million upfront payment to Pfizer and are required to make additional
payments to Pfizer for the achievement of certain development and regulatory and sales milestones and royalties on sales as
required by the license agreement. Prior to the FDA approval of Rubraca, we made milestone payments of $1.4 million, which
were recognized as acquired in-process research and development expense.
On August 30, 2016, we entered into a first amendment to the worldwide license agreement with Pfizer, which amends the
June 2011 existing worldwide license agreement to permit us to defer payment of the milestone payments payable upon (i) FDA
approval of an NDA for 1st Indication in US and (ii) European Commission approval of an MAA for 1st Indication in the EU, to a
date that is 18 months after the date of achievement of such milestones.
On December 19, 2016, Rubraca received its initial FDA approval. This approval resulted in a $0.75 million milestone
payment to Pfizer as required by the license agreement, which was paid in the first quarter of 2017. This FDA approval also
resulted in an obligation to pay a $20.0 million milestone payment, for which we exercised the option to defer payment by
agreeing to pay $23.0 million within 18 months after the date of the FDA approval. We paid the $23.0 million milestone payment
in June 2018.
In April 2018, Rubraca received a second FDA approval. This approval resulted in an obligation to pay a $15.0 million
milestone payment, which we paid in April 2018.
In May 2018, Rubraca received its initial European Commission marketing authorization. This approval resulted in an
obligation to pay a $20.0 million milestone payment, which we paid in June 2018.
In January 2019, Rubraca received a second European Commission approval. This approval resulted in an obligation to pay a
$15.0 million milestone payment, which we paid in February 2019.
In June 2019, we paid a $0.75 million milestone payment due to the launch of Rubraca as maintenance therapy in Germany in
March 2019.
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In May 2020, Rubraca received a third FDA approval for Rubraca as a monotherapy treatment of adult patients with
BRCA1/2-mutant recurrent, metastatic castrate-resistant prostate cancer. This approval resulted in an obligation to pay an $8.0
million milestone payment, which we paid in June 2020.
These milestone payments were recognized as intangible assets and are amortized over the estimated remaining useful life of
Rubraca.
We are obligated under the license agreement to use commercially reasonable efforts to develop and commercialize Rubraca
and we are responsible for all ongoing development and commercialization costs for Rubraca. We are required to make
regulatory milestone payments to Pfizer of up to an additional $8.0 million in aggregate if specified clinical study objectives and
regulatory filings, acceptances and approvals are achieved. In addition, we are obligated to make sales milestone payments to
Pfizer if specified annual sales targets for Rubraca are met, which relate to annual sales targets of $250.0 million and above,
which, in the aggregate, could amount to total milestone payments of $170.0 million, and tiered royalty payments at a mid-teen
percentage rate on net sales, with standard provisions for royalty offsets to the extent we need to obtain any rights from third
parties to commercialize Rubraca.
The license agreement with Pfizer will remain in effect until the expiration of all of our royalty and sublicense revenue
obligations to Pfizer, determined on a product-by-product and country-by-country basis, unless we elect to terminate the license
agreement earlier. If we fail to meet our obligations under the agreement and are unable to cure such failure within specified time
periods, Pfizer can terminate the agreement, resulting in a loss of our rights to Rubraca and an obligation to assign or license to
Pfizer any intellectual property rights or other rights we may have in Rubraca, including our regulatory filings, regulatory
approvals, patents and trademarks for Rubraca.
In April 2012, we entered into a license agreement with AstraZeneca to acquire exclusive rights associated with Rubraca
under a family of patents and patent applications that claim methods of treating patients with PARP inhibitors in certain
indications. The license enables the development and commercialization of Rubraca for the uses claimed by these patents.
AstraZeneca also receives royalties on net sales of Rubraca.
Lucitanib
On November 19, 2013, we acquired all of the issued and outstanding capital stock of EOS pursuant to the terms set forth in
that certain Stock Purchase Agreement, dated as of November 19, 2013 (the “Stock Purchase Agreement”), by and among the
Company, EOS, its shareholders (the “Sellers”) and Sofinnova Capital V FCPR, acting in its capacity as the Sellers’
representative. Following the acquisition, EOS became a wholly-owned subsidiary of the Company. Under the terms of the Stock
Purchase Agreement, in addition to the initial purchase price paid at the time of the closing of the acquisition and other license
fees due to Advenchen described below, we will also be obligated to pay to the Sellers a milestone payment of $65.0 million
upon obtaining the first NDA approval from the FDA with respect to lucitanib.
In October 2008, Ethical Oncology Science, S.p.A. (“EOS”) (now known as Clovis Oncology Italy S.r.l.) entered into an
exclusive license agreement with Advenchen Laboratories LLC (“Advenchen”) to develop and commercialize lucitanib on a
global basis, excluding China.
We are obligated to pay Advenchen tiered royalties at percentage rates in the mid-single digits on net sales of lucitanib, based
on the volume of annual net sales achieved. In addition, after giving effect to the first and second amendments to the license
agreement, we are required to pay to Advenchen 25% of any consideration, excluding royalties, we receive from sublicensees, in
lieu of the milestone obligations set forth in the agreement. We are obligated under the agreement to use commercially reasonable
efforts to develop and commercialize at least one product containing lucitanib, and we are also responsible for all remaining
development and commercialization costs for lucitanib.
The license agreement with Advenchen will remain in effect until the expiration of all of our royalty obligations to
Advenchen, determined on a product-by-product and country-by-country basis, unless we elect to terminate the agreement
earlier. If we fail to meet our obligations under the agreement and are unable to cure such failure within specified time periods,
Advenchen can terminate the agreement, resulting in a loss of our rights to lucitanib.
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FAP-2286 and the Radionuclide Therapy Development Program
In September 2019, we entered into a global license and collaboration agreement with 3BP to develop and commercialize a
PTRT and imaging agent targeting FAP. The lead candidate, designated internally as FAP-2286, is being developed pursuant to a
global development plan agreed to by the parties. We are responsible for the costs of all preclinical and clinical development
activities described in the plan, including the costs for a limited number of 3BP full-time equivalents and external costs incurred
during the preclinical development phase of the collaboration. Upon the signing of the license and collaboration agreement in
September 2019, we made a $9.4 million upfront payment to 3BP, which we recognized as acquired in-process research and
development expense.
Pursuant to the terms of the FAP agreement, we are required to make additional payments to 3BP for annual technology
access fees and upon the achievement of certain development and regulatory milestone events (or on certain dates, whichever
occur earlier). We are also obligated to pay 3BP single- to low-double-digit royalties on net sales of the FAP-targeted therapeutic
product and imaging agent, based on the volume of annual net sales achieved. In addition, 3BP is entitled to receive 34% of any
consideration, excluding royalties on the therapeutic product, pursuant to any sublicenses we may grant.
We are obligated under the license and collaboration agreement to use diligent efforts to develop FAP-2286 and
commercialize a FAP-targeted therapeutic product and imaging agent, and we are responsible for all commercialization costs in
our territory. The agreement with 3BP will remain in effect until the expiration of our royalty obligations to 3BP, determined on a
product-by-product and country-by-country basis, unless we elect to terminate the agreement earlier. If we fail to meet our
obligations under the agreement and are unable to cure such failure within specified time periods, 3BP can terminate the
agreement, resulting in a loss of our rights. 3BP also has the right to terminate the agreement under certain circumstances in
connection with our change of control in which the acquiring party retains a product competitive with the FAP-targeted
therapeutic product or, in the event marketing authorization has not yet been obtained, does not agree to the then-current global
development plan.
In February 2020, we finalized the terms of a drug discovery collaboration agreement with 3BP to identify up to three
additional, undisclosed targets for peptide-targeted radionuclide therapy, to which we will obtain global rights for any resulting
product candidates. We are responsible for the costs of all preclinical and clinical development activities conducted under the
discovery program, including the costs for a limited number of 3BP full-time equivalents and external costs incurred during the
discovery and preclinical development phase for each collaboration target. The discovery collaboration agreement was effective
December 31, 2019, for which we incurred a $2.1 million technology access fee, which we accrued and recognized as a research
and development expense.
Pursuant to the terms of the discovery collaboration agreement, we are required to make additional payments to 3BP for
annual technology access fees and upon the achievement of certain development and regulatory milestone events (or on certain
dates, whichever occur earlier). We are also obligated to pay 3BP a 6% royalty on net sales of License Products (as defined in the
agreement), based on the volume of quarterly net sales achieved.
We are obligated under the discovery collaboration agreement to use diligent efforts to develop and commercialize the product
candidates, if any, that result from the discovery program, and we are responsible for all clinical development and
commercialization costs. The agreement with 3BP will remain in effect until the expiration of our royalty obligations to 3BP,
determined on a product-by-product and country-by-country basis, unless we elect to terminate the agreement earlier. If we fail to
meet our obligations under the agreement and are unable to cure such failure within specified time periods, 3BP can terminate the
agreement, resulting in a loss of our rights.
15. Net Loss Per Common Share
Basic net loss per share is calculated by dividing net loss by the weighted-average number of common shares outstanding
during the period. Diluted net loss per share is computed by dividing net loss by the weighted-average number of common share
equivalents outstanding using the treasury-stock method for the stock options and RSUs and the if-converted method for the
convertible senior notes. As a result of our net losses for the periods presented, all potentially dilutive common share equivalents
were considered anti-dilutive and were excluded from the computation of diluted net loss per share.
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The shares outstanding at the end of the respective periods presented in the table below were excluded from the calculation of
diluted net loss per share due to their anti-dilutive effect (in thousands):
Common shares under stock incentive plans
Convertible senior notes
Total potential dilutive shares
16. Income Taxes
Year ended December 31,
2020 2019 2018
2,480
41,598
44,078
3,095
25,969
29,064
1,319
8,584
9,903
We are subject to U.S. federal, state and foreign income tax. The geographical components of loss before income taxes
consisted of the following (in thousands):
Domestic
Foreign
Total loss before income taxes
Year ended December 31,
2019
$(370,839) $(399,497) $(368,402)
2020
2018
1,080
871
1,001
$(369,759) $(398,626) $(367,401)
The income tax provision consists of the following current and deferred tax expense (benefit) amounts (in thousands):
Year ended December 31,
2018
2020 2019
Current tax:
U.S. Federal & State
Foreign
Total current expense (benefit)
Deferred tax:
U.S. Federal & State
Foreign
Total deferred (benefit)
Total income tax expense (benefit)
$
50
$
3
(597) 1,795
1,798
(547)
$
15
593
608
—
—
—
— — —
—
$ 608
—
$ (547) $ 1,798
—
A reconciliation of the U.S. federal statutory income tax rate to our effective tax rate is provided below:
Federal income tax benefit at statutory rate
State income tax benefit, net of federal benefit
Tax credits
Change in uncertain tax positions
SEC settlement costs
Convertible debt transactions
Prior year true ups
Share based compensation
Tax rate changes
Change in valuation allowance
Other
Effective income tax rate
F-37
2020
Year ended December 31,
2018
2019
(21.0)% (21.0)% (21.0)%
(2.9)
(1.6)
(1.1)
(1.5)
(4.3)
0.1
—
—
—
2.2
0.1
0.9
2.3
2.6
0.1
1.4
26.5
16.1
0.6
0.8
(0.2)% 0.5 % 0.2 %
(3.1)
(1.3)
0.1
1.1
—
(0.8)
0.8
0.3
23.2
0.9
Table of Contents
The significant components of our deferred tax assets and liabilities are as follows (in thousands):
Deferred tax assets:
Net operating loss carryforward
Tax credit carryforwards
Interest expense limitation carryforward
Intangible assets
Share-based compensation expense
Product acquisition costs
Lease liabilities
Accrued liabilities and other
Total deferred tax assets
Valuation allowance
Deferred tax assets, net of valuation allowance
Deferred tax liabilities:
Right-of-use assets
Prepaid expenses and fixed assets
Total deferred tax liabilities
Net deferred tax liability
December 31,
2020
2019
$ 414,932
247,064
5,371
94,558
33,169
4,992
6,122
7,488
813,696
(806,622)
7,074
$ 396,100
243,901
4,449
61,459
34,006
6,288
5,317
5,817
757,337
(750,508)
6,829
(6,799)
(275)
(7,074)
$
— $
(6,337)
(492)
(6,829)
—
The Tax Cuts and Jobs Act (the “Act”), enacted in the U.S. on December 22, 2017, subjects a U.S. shareholder to tax on the
Global Intangible Low-Taxed Income (“GILTI”) earned by certain foreign subsidiaries. The FASB Staff Q&A, Topic 740, No. 5,
“Accounting for Global Intangible Low-Taxed Income”, states that an entity can make an accounting policy election to either
recognize deferred taxes for temporary basis differences expected to reverse as GILTI in future years or to provide for the tax
expense related to GILTI in the year the tax is incurred as a period expense only. We have elected to account for GILTI in the
year the tax is incurred.
The realization of deferred tax assets is dependent upon a number of factors including future earnings, the timing and amount
of which is uncertain. A valuation allowance was established for the net deferred tax asset balance due to management’s belief
that the realization of these assets is not likely to occur in the foreseeable future. We recorded a net increase to the valuation
allowance of $56.1 million and $102.6 million for the years ended December 31, 2020 and 2019, respectively, primarily due to
the growth in net operating losses and amortizable research and development expenses incurred during the year.
In addition, the Company recognizes tax benefits if it is more likely than not to be sustained under audit by the relevant taxing
authority based on technical merits. An uncertain tax position will not be recognized if it has less than a 50% likelihood of being
sustained during audit. If the threshold is met, the tax benefit is measured and recognized at the largest amount above the greater
than 50% likelihood threshold at time of settlement. The balance of unrecognized tax benefits at December 31, 2020 of $8.0
million, if recognized, would not impact the Company’s effective tax rate as long as we remain subject to a full valuation
allowance. The following table summarizes the gross amounts of unrecognized tax benefits (in thousands):
Balance at beginning of year
Changes related to prior period tax positions
Additions related to current period tax positions
Settlements with tax authorities
Expiration of statute of limitations
Balance at end of year
Year ended December 31,
2020
7,525
64
415
—
—
8,004
$
$
$
$
2019
24,775
(35)
398
(17,613)
—
7,525
As of December 31, 2020, we had approximately $1.7 billion, $1.6 billion and $2.0 million of U.S., federal, state and foreign
net operating loss carryforwards, respectively. The U.S. federal net operating losses, generated prior to the enactment of the Act,
totaling $1.1 billion, will expire from 2029 to 2037 if not utilized and the U.S. federal net operating losses generated after the
enactment of the Act, totaling $0.6 billion, do not expire and are carried forward
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Table of Contents
indefinitely. U.S. state net operating losses will expire from 2024 to 2040 if not utilized. We have research and development and
orphan drug tax credit carryforwards of $254.5 million that will expire from 2030 through 2040 if not utilized.
We believe that a change in ownership as defined under Section 382 of the U.S. Internal Revenue Code occurred as a result of
our public offering of common stock completed in April 2012. Future utilization of the federal net operating losses (“NOL”) and
tax credit carryforwards accumulated from inception to the change in ownership date will be subject to annual limitations to
offset future taxable income. It is possible that a change in ownership will occur in the future, which will limit the NOL amounts
generated since the last estimated change of ownership. As of December 31, 2019, our audit by the Internal Revenue Service was
finalized for the year ended December 31, 2015. The amount of orphan drug tax credit for years 2009 and 2010 was adjusted, but
no additional taxes are due as a result of our net operating losses; this also resulted in a release of the uncertain tax position
(“UTP”) of $17.6 million and a decrease to the U.S. federal net operating loss carryforward due to the release of the UTP
recorded against the credit. Our federal and state income taxes for the period from January 1, 2009 to December 31, 2014, other
than the orphan drug tax credit, and January 1, 2016 through December 31, 2020 remain open to an audit. Our foreign
subsidiaries are also subject to tax audits by tax authorities in the jurisdictions where they operate for the periods from December
31, 2016 to December 31, 2020.
We may be assessed interest and penalties related to the settlement of tax positions and such amounts will be recognized
within income tax expense when assessed. To date, no interest and penalties have been recognized.
17. Employee Benefit Plans
We maintain a retirement plan, which is qualified under section 401(k) of the Internal Revenue Code for our U.S. employees.
The plan allows eligible employees to defer, at the employee’s discretion, pretax compensation up to the IRS annual limits. We
matched contributions up to 4% of the eligible employee’s compensation or the maximum amount permitted by law. Total
expense for contributions made to U.S. employees was approximately $2.1 million, $2.2 million and $2.0 million for the years
ended December 31, 2020, 2019 and 2018, respectively. Our international employees participate in retirement plans or
postretirement life insurance plans governed by the local laws in effect for the country in which they reside. We made
contributions to the retirement plans or postretirement life insurance plans of international employees of approximately $1.5
million, $1.1 million and $0.9 million for the years ended December 31, 2020, 2019 and 2018, respectively.
18. Segment Information
The following table presents information about our reportable segments for the year months ended December 31, 2020, 2019
and 2018 (in thousands):
Product revenue
Operating expenses:
Cost of sales - product
Cost of sales -
intangible asset
amortization
Research and
development
Selling, general and
administrative
Acquired in-process
research and
development
Other operating
expenses
Total expenses
Operating loss
2020
Year ended December 31,
2019
2018
U.S.
$ 146,259
Ex-U.S. Total
$ 18,263
$ 164,522
U.S.
$ 137,187
Ex-U.S. Total
$
5,819
$ 143,006
$
U.S.
95,388
Ex-U.S.
Total
$
— $
95,388
29,526
6,602
36,128
28,179
1,747
29,926
19,444
—
19,444
2,287
2,890
5,177
1,956
2,804
4,760
1,954
676
2,630
249,444
8,263
257,707
275,518
7,628
283,146
226,925
4,422
231,347
139,455
24,439
163,894
161,132
21,637
182,769
161,743
14,038
175,781
—
3,804
—
—
—
3,804
9,440
9,711
—
—
9,440
9,711
—
—
—
—
424,516
(278,257)
42,194
(23,931)
466,710
(302,188)
485,936
(348,749)
33,816
(27,997)
519,752
(376,746)
410,066
(314,678)
19,136
(19,136)
—
—
429,202
(333,814)
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Table of Contents
19. Quarterly Information (Unaudited)
The results of operations on a quarterly basis for the years ended December 31, 2020 and 2019 were as follows (in thousands):
Revenues:
Product revenue
Operating expenses:
Cost of sales - product
Cost of sales - intangible
asset amortization
Research and
development
Selling, general and
administrative
Acquired in-process
research and
development
Other operating
expenses
Total expenses
Operating loss
Other income (expense):
Interest expense
Foreign currency (loss)
gain
(Loss) gain on
extinguishment of debt
Loss on convertible
senior notes conversion
Legal settlement loss
Other income
Other income (expense), net
Loss before income taxes
Income tax benefit
(expense)
Net loss
Basic and diluted net loss
per common share
Basic and diluted weighted
average common shares
outstanding
March 31, June 30, September 30, December 31, March 31, June 30, September 30, December 31,
2020
2020
2020
2020
2019
2019
2019
2019
`
$
42,564 $ 39,887 $
38,772 $
43,299 $
33,118 $
32,978 $
37,603 $
39,307
9,096
9,120
1,212
1,280
8,438
1,343
9,474
1,342
7,405
6,445
1,120
1,217
8,134
1,212
7,942
1,211
68,221
69,878
62,902
56,706
62,031
70,746
77,896
72,473
42,598
41,902
38,636
40,758
47,761
48,029
41,811
45,168
—
3,449
—
355
—
—
—
—
—
—
—
—
124,576 122,535
(82,648)
(82,012)
111,319
(72,547)
108,280 118,317 126,437
(93,459)
(85,199)
(64,981)
9,440
—
5,539
144,032
(106,429)
4,172
130,966
(91,659)
(9,561)
(6,739)
(6,859)
(7,349)
(3,590)
(3,817)
(5,278)
(6,720)
(877)
142
633
30
(192)
(226)
(229)
—
(3,277)
—
—
—
—
18,480
(7,791)
—
841
(17,388)
(99,400)
—
—
239
(9,635)
(92,283)
—
—
79
(6,147)
(78,694)
(27,284)
—
202
(34,401)
(99,382)
—
(25,000)
—
—
2,400
(1,382)
1,899
(27,144)
(86,581) (120,603)
68
36
$ (99,332) $ (92,247) $
18
(78,676) $
425
176
(98,957) $ (86,421) $ (120,427) $
160
—
(1,750)
781
12,004
(94,425)
350
(94,075) $
100
—
—
—
1,262
(5,358)
(97,017)
(2,484)
(99,501)
$
(1.39) $
(1.15) $
(0.89) $
(1.02) $
(1.63) $
(2.27) $
(1.72) $
(1.81)
71,662
80,453
88,255
96,681
52,891
53,028
54,707
54,834
F-40
Table of Contents
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly authorized.
SIGNATURES
Date: February 24, 2021
CLOVIS ONCOLOGY, INC.
By: /S/ PATRICK J. MAHAFFY
Patrick J. Mahaffy
President and Chief Executive Officer; Director
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report has been signed by the following
persons on behalf of the registrant and in the capacities and on the dates indicated:
Name
Title
Date
/S/ PATRICK J. MAHAFFY
Patrick J. Mahaffy
President and Chief Executive Officer; Director
(Principal Executive Officer)
February 24, 2021
/S/ DANIEL W. MUEHL
Daniel W. Muehl
Executive Vice President and Chief Finance Officer
(Principal Financial Officer and Principal Accounting Officer)
February 24, 2021
/S/ BRIAN G. ATWOOD
Brian G. Atwood
/S/ ROBERT W. AZELBY
Robert W. Azelby
/S/ JAMES C. BLAIR
James C. Blair
/S/ RICHARD A. FAIR
Richard A. Fair
/S/ KEITH FLAHERTY
Keith Flaherty
/S/ GINGER L. GRAHAM
Ginger L. Graham
/S/ PAUL KLINGENSTEIN
Paul Klingenstein
/S/ EDWARD J. MCKINLEY
Edward J. McKinley
/S/ THORLEF SPICKSCHEN
Thorlef Spickschen
Director
Director
Director
Director
Director
Director
Director
Director
Director
February 24, 2021
February 24, 2021
February 24, 2021
February 24, 2021
February 24, 2021
February 24, 2021
February 24, 2021
February 24, 2021
February 24, 2021
Exhibit 10.40
Execution Copy
CERTAIN CONFIDENTIAL PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED AND REPLACED WITH
“[***]”. SUCH IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THIS EXHIBIT BECAUSE IT IS
(I) NOT MATERIAL AND (II) WOULD LIKELY CAUSE COMPETITIVE HARM TO THE COMPANY IF
PUBLICLY DISCLOSED.
LICENSE AND COLLABORATION AGREEMENT
THIS LICENSE AND COLLABORATION AGREEMENT (the “Agreement”) is made and entered into
as of 20 September, 2019 (the “Effective Date”) by and between 3B PHARMACEUTICALS GMBH, a limited
liability company organized and existing under the laws of Germany, with registered offices at Magnusstraße 11, D-
12489 Berlin, Germany (“3BP”) and CLOVIS ONCOLOGY, INC., a corporation organized and existing under the
laws of the State of Delaware, USA, having offices at 5500 Flatiron Parkway, Suite 100, Boulder, Colorado 80301
USA (“Clovis”). 3BP and Clovis are sometimes referred to herein individually as a “Party” and collectively as the
“Parties.”
BACKGROUND
WHEREAS, Clovis is a biopharmaceutical company focused on acquiring, developing, and commercializing
innovative anti-cancer agents;
WHEREAS, 3BP is a biotechnology company developing targeted radiopharmaceutical drugs and
diagnostics for oncology indications with a high unmet medical need;
WHEREAS, 3BP has developed proprietary radionuclide conjugated substances and intellectual property
covering those substances targeting fibroblast activation protein alpha (FAP);
WHEREAS, Clovis is interested in licensing from 3BP certain rights to the aforementioned substances and
intellectual property in order to further develop those substances and manufacture and commercialize products that
include those substances for certain territories, all in accordance with the terms and conditions set forth herein;
WHEREAS, 3BP is willing to grant Clovis the license described above;
WHEREAS, 3BP will retain the rights to the substances and intellectual property for certain territories and
the right to further develop the substances and manufacture and commercialize products that include those substances
in certain territories;
WHEREAS, Clovis is willing to grant 3BP the right to use the data and results arising from the development
and manufacture activities conducted by Clovis, for the development, manufacture and commercialization activities
of 3BP in its retained territories;
WHEREAS, both Parties’ development activities shall be coordinated in a joint global development plan as
well as both Parties’ manufacture activities shall be coordinated in a joint manufacture plan and the Parties will
establish joint bodies in order to coordinate their activities and foster the collaboration.
NOW, THEREFORE, in consideration of the foregoing premises and the mutual promises, covenants and
conditions contained in this Agreement, the Parties agree as follows:
1. DEFINITIONS
Capitalized terms used in this Agreement (other than the headings of the Sections or Articles) have the
following meanings set forth in this Article 1, or, if not listed in this Article 1, the meanings as designated in the text
of this Agreement.
1.1 “3BP Indemnitees” has the meaning set forth in Section 13.1.
1.2 “3BP Know-How” means (a) all Know-How that is Controlled by 3BP or its Affiliates as of the
Effective Date or during the Term and are necessary or useful for the Development, Manufacture or
Commercialization of a Product,
and Regulatory
Documentation generated by or on behalf of 3BP and its Affiliates (including generated by contract research
organizations or Contract Manufacturers).
and (b) any Development Data,
Manufacturing Data,
1.3 “3BP Patents” means any Patent that is Controlled by 3BP or its Affiliates as of the Effective Date or
during the Term that (a) Covers a FAP-Targeting Compound, and/or (b) is necessary or useful for the Development,
Manufacture or Commercialization of a Product, including (i) the [***] and the [***], and (ii) Patents that Cover
Sole Inventions solely owned by 3BP pursuant to Section 9.2(a). The 3BP Patents existing as of the Effective Date
are listed on Exhibit 1.3.
1.4 “3BP Technology” means the 3BP Patents, 3BP Know-How, and 3BP’s interest in any Joint Patents.
1.5 “Acquiror” has the meaning set forth in Section 1.13.
1.6 “Affiliate” means, with respect to a Party, a person, corporation, partnership, or other entity that
controls, is controlled by or is under common control with such Party. For the purposes of the definition in this
Section 1.6, the word “control” (including, with correlative meaning, the terms “controlled by” or “under the
common control with”) means the actual power, either directly or indirectly through one (1) or more intermediaries,
to direct or cause the direction of the management and policies of such entity either by the ownership of at least fifty
percent (50%) of the voting stock of such entity or the ability to otherwise control the management of the entity.
1.7 “Alliance Manager” has the meaning set forth in Section 2.3.
1.8 “Applicable Law” means all laws, statutes, rules, regulations, ordinances and other pronouncements
having the effect of law of any federal, national, multinational, supranational, state, provincial, county, city or other
political subdivision, domestic or foreign, which may be in effect from time to time and applicable to conduct under
this Agreement.
1.9 “Applicable CoC Party” means, the Acquiror, Clovis or Clovis’ successor, whatever is applicable
after the respective Change of Control transaction has occurred.
1.10 “Backup Candidates” means, as of the Effective Date, the FAP-Targeting Product identified on
Exhibit 1.10, and/ or any other FAP-Targeting Product identified and agreed by the Parties during the Term pursuant
to the process described in Section 3.1 as a candidate for further Pre-Clinical Development, either as a potential
future replacement for a Lead Candidate or a potential future additional Lead Candidate.
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1.11 “Business Day” means a day other than Saturday, Sunday or any day on which commercial banks
located in either Denver, Colorado or Berlin, Germany are authorized or obligated by Applicable Law to close.
1.12 “Calendar Year” means any twelve (12) month period commencing on January 1.
1.13 “Change of Control” means a transaction in which a Party: (a) sells, conveys or otherwise disposes
of all or substantially all of its property or business (with the acquiror of the property or business being referred to as
the “Acquiror”); or (b) (i) merges or consolidates with any other entity or person (other than a wholly-owned
subsidiary of such Party); or (ii) effects any other transaction or series of transactions; in each case of clause (i) or
(ii), such that the stockholders of such Party immediately prior thereto, in the aggregate, no longer own, directly or
indirectly, beneficially or legally, at least fifty percent (50%) of the outstanding voting securities or capital stock of
the surviving entity following the closing of such merger, consolidation, other transaction or series of transactions.
Notwithstanding the foregoing subsection (b), a Change of Control will not include any transaction or series of
related transactions principally conducted for bona fide equity financing purposes in which cash is received, or
indebtedness is cancelled or converted, or a combination thereof occurs; provided such equity financing is made
solely by non-strategic investors (including venture capitalist entities, investment banks, and their Affiliates) who are
not in the business of Developing or Commercializing pharmaceutical or biological products.
1.14 “Change of Control Closing” means the completion of the Change of Control transaction.
1.15 “Claims” has the meaning set forth in Section 13.1.
1.16 “Clovis Indemnitees” has the meaning set forth in Section 13.2.
1.17 “Clovis Know-How” means (a) all Know-How that is Controlled by Clovis or its Affiliates as of the
Effective Date or during the Term and are or were necessary or useful for the Development, Manufacture or
Commercialization of a Product and (b) any Development Data, Manufacturing Data, Manufacturing Documentation
and Regulatory Documentation generated by or on behalf of Clovis and its Affiliates (including generated by
contract research organizations and Contract Manufacturers).
1.18 “Clovis Patents” means any Patent that is Controlled by Clovis or its Affiliates as of the Effective
Date or during the Term that (a) Covers a FAP-Targeting Compound and/or (b) is or was necessary or useful for the
Development, Manufacture or Commercialization of a Product, including Patents that Cover Sole Inventions solely
owned by Clovis pursuant to Section 9.2(a).
1.19 “Clovis Technology” means the Clovis Patents, the Clovis Know-How, and Clovis’ interest in any
Joint Patents.
1.20 “CMC Activities” means the chemistry, manufacturing and controls activities necessary or useful for
generating the CMC Information required for Regulatory Approval of a Product, including Manufacture of
commercial and/or clinical trial materials, process and method validation, and all other related activities that are
necessary or useful to obtain or maintain Regulatory Approval of a Product.
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1.21 “CMC Information” means information related to the chemistry, manufacturing and controls of a
Product required for approval to commence clinical studies and/ or Regulatory Approval of a Product, as specified by
FDA or other applicable Regulatory Authority.
1.22 “Collaboration” has the meaning set forth in Section 2.1.
1.23 “Combination Product” has the meaning set forth in Section 1.78.
1.24 “Commercialize” means to promote, market, distribute, sell (and offer for sale or contract to sell),
import, export, provide product support for a Product, and interacting with Regulatory Authorities regarding the
foregoing, and includes post-approval commitments and pharmacovigilance. For clarity, “Commercializing” and
“Commercialization” have a correlative meaning.
1.25 “Committee” means the JSC or any other committee established by the Parties pursuant to
Section 2.1, as the case may be.
1.26 “Competing Product” means any therapeutic pharmaceutical product comprising a binding moiety
that deliberately targets and primarily binds to FAP, and is or can be linked to an anticancer payload as its primary
mechanism of action, other than a Product.
1.27 “Confidential Information” of a Party means all information of such Party that is disclosed to the
other Party under this Agreement or of which the other Party otherwise obtains knowledge under or in connection
with this Agreement, whether in oral, written, graphic, or electronic form. The terms of this Agreement will be
Confidential Information of each Party.
1.28 “Contract Manufacturer” means any Third Party engaged by a Party to Manufacture a Product (or
any component of a Product).
1.29 “Controlled” means, with respect to any compound, material, Know-How or other Intellectual
Property Right, that the applicable Party owns or has a license to such compound, material, Know-How or other
Intellectual Property Right and has the ability to grant to the other Party access, a license or a sublicense (as
applicable) to such compound, material, Know-How or other Intellectual Property Right as provided for herein
without violating the terms of any agreement or other arrangements with any Third Party existing at the time such
Party would be first required hereunder to grant the other Party such access, license or sublicense.
1.30 “Cover,” “Covered” or “Covering” means, with reference to a Patent, that the making, using,
selling, offering for sale or importing of a composition of matter or practice of a method would infringe a Valid
Claim of such Patent in the country in which such activity occurs.
1.31 “Current Good Manufacturing Practice” or “cGMP” means the then-current standards for the
manufacture of pharmaceutical products officially published and interpreted by EMA, FDA and/ or other applicable
Regulatory Authorities that may be in effect from time to time and are applicable to the Manufacture of the Products.
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1.32 “Data Exclusivity” means, with respect to any country or other jurisdiction in the Licensed Territory,
a market protection, granted by a Regulatory Authority in such country or other jurisdiction, during which Clovis, its
Affiliates or Sublicensees have the exclusive right to Commercialize the Product in such country or other jurisdiction
through a regulatory exclusivity right, including orphan drug designation.
1.33 “Develop” or “Development” means, with respect to a Product, all research, preclinical, clinical, and
regulatory activities (e.g., preparation of regulatory applications), including synthesis of compounds, target validation
activities (e.g., expression analysis), preparation and conduct of pre-clinical and clinical studies, test method
development and stability testing, assay development, toxicology, formulation, quality assurance/quality control
development, statistical analysis, process development, pharmacokinetic studies, regulatory affairs, and drug safety
surveillance activities, in each case prior to Regulatory Approval or thereafter, and obtaining Regulatory Approvals.
1.34 “Development Costs” means all costs incurred by or on behalf of either Party after the Effective Date
that are reasonably and directly allocable to the Development of Products and/ or Backup Candidates pursuant to the
Global Development Plan. Development Costs will include but not be limited to FTE Costs, out-of-pocket costs
actually incurred by each Party, costs of any Products and comparator drug supplied for use in clinical studies, ethics
committee fees, investigator fees, investigator meeting costs, hospital fees and contract (including clinical) research
organization's fees. Development Costs shall include FTE Costs relating to regulatory activities involving
preparation, submission of documents related to, and review of clinical trials with any Regulatory Authority.
1.35 “Development Data” means all research data, preclinical data, pharmacology data, clinical data,
and/or all regulatory documentation, information and submissions and communications pertaining to, or made in
association with an IND, Marketing Authorization application and other marketing approval applications, Regulatory
Approval or the like for the Products and/ or Backup Candidates, in each case that are generated in the conduct of
activities conducted under the Global Development Plan or otherwise under this Agreement.
1.36 “Diligent Efforts” means, with respect to the efforts to be expended by a Party with respect to any
objective under this Agreement, the reasonable, diligent, good faith efforts to accomplish such objective as a
reasonable company would normally use to accomplish a similar objective under similar circumstances. It is
understood and agreed that with respect to the Development and Commercialization of a Product by either Party,
such efforts will be substantially equivalent to those efforts and resources commonly used by a reasonable company
for pharmaceutical products owned by it or to which it has rights, which product is at a similar stage in its
development or product life and is of similar market potential taking into account efficacy, safety, approved labeling,
the competitiveness of alternative products in the marketplace, the patent and other proprietary position of the
product, the likelihood of regulatory approval given the Regulatory Authority involved, the profitability of the
product including the amounts payable to licensors of Patent or other Intellectual Property Rights, alternative
products and other relevant factors. Diligent Efforts will be determined on a market-by-market or country-by-country
basis, and indication-by-indication basis, and it is anticipated that the level of efforts required will be different for
different markets and indications and will change over time, reflecting changes in the status of the Product and
markets involved.
1.37 “Distributor” means a Third Party that (a) purchases any Products in finished form from or at the
direction of Clovis or any of its Affiliates or Sublicensees, and (b) has the
***Confidential Treatment Requested.
5
right to Commercialize such Products in one or more regions, or has an option to do the foregoing. A Distributor will
not be considered a Sublicensee hereunder. For the avoidance of doubt, any Third Party that actually requires a
sublicense from Clovis under the 3BP Technology in order not to infringe the 3BP Technology by its activities, shall
be deemed to be a Sublicensee even if it is designated as a Distributor.
1.38 “Dollars” or “$” means the lawful currency of the U.S.
1.39 “Due Diligence Data” has the meaning set forth in Section 12.2(i).
1.40 “Effective Date” has the meaning set forth in the first paragraph of this Agreement.
1.41 “EMA” means the European Medicines Agency or any successor entity.
1.42 “EU” means the European Union, as its membership may be altered from time to time, and any
successor thereto.
1.43 “Euros” or “€” means the lawful currency of the Eurozone.
1.44 “Executive Officers” means the Chief Executive Officer of Clovis and the Managing Director of 3BP
(or their respective designees).
1.45 “External Patent Costs” means fees charged by any national or regional patent office and the
reasonable costs of any external patent counsel engaged by a Party that are attributable to the filing, prosecution,
maintenance and defense of a FAP Patent and are incurred by a Party pursuant to the terms of this Agreement.
1.46 “FAP” means a fibroblast activation protein.
1.47 “FAP Patents” means the 3BP Patents, Clovis Patents and Joint Patents.
1.48 “FAP-Targeting Compound” means a molecule identified using the 3BP Technology, [***].
1.49 “FAP-Targeting Product” means any molecule that comprises a FAP-Targeting Compound that is
or can be labeled with a radioactive isotope for use as a therapeutic, diagnostic or theranostic radiopharmaceutical,
and which the Parties Develop pursuant to the Collaboration. [***].
1.50 “FDA” means the United States Food and Drug Administration or any successor entity.
1.51 “First Commercial Sale” means, with respect to a Product in a particular country, the first
commercial sale of such Product by a Selling Party to an unaffiliated Third Party in such country after all necessary
Regulatory Approvals have been obtained in such country.
1.52 “FTE” means a full time equivalent of work devoted to or in support of the Development or
Manufacture of the Product in accordance with the Global Development Plan
***Confidential Treatment Requested.
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or pursuant to this Agreement, which is carried out by one or more qualified scientific or technical employees or
contract personnel of a Party or its Affiliates, as measured in accordance with such Party’s normal time allocation
practices. For the avoidance of doubt, employees who work fewer than such full time equivalent of work (whether
via working a partial year or part-time) are included in an FTE, provided their hours are combined to complete one
FTE. By way of example, but not limitation, if the full time equivalent of work is [***] ([***]) hours, an employee
working [***] ([***]) hours in a given Calendar Year would be combined with an employee working [***] ([***])
hours in the same Calendar Year to form one FTE. Similarly, in such example, any employee can be allocated at a
percentage of time equaling less than one hundred percent (100%) of their work in a Calendar Year; provided that
FTEs are calculated in [***] ([***]) hour increments.
1.53 “FTE Cost” means, for any period, the FTE Rate multiplied by the number of FTEs in such period.
1.54 “FTE Rate” means the rate set forth in Exhibit 1.54 per Calendar Year (pro-rated (a) for the period
beginning on the Effective Date and ending at the end of the first Calendar Year and (b) for the period beginning on
the beginning of a Calendar Year and ending at the end of the Pre-Clinical Program Term). The FTE Rate is “fully
burdened” and will cover employee salaries and such facilities and equipment and other materials and services
including ordinary laboratory and manufacturing consumables procured from distributors of relevant products as they
may use.
1.55 “GAAP” means U.S. generally accepted accounting principles, consistently applied.
1.56 “Generic Product” means, on a country-by-country and Therapeutic Product-by-Therapeutic Product
basis, any pharmaceutical product that (a) is sold by a Third Party that is not an Affiliate or Sublicensee of Clovis
under a Regulatory Approval granted by a Regulatory Authority to such Third Party, (b) contains the identical or
substantially similar (as determined by the applicable Regulatory Authority) active ingredient(s) as the approved
Therapeutic Product, and (c) is labeled, advertised, marketed, promoted or intended for use in such country for an
Indication that is also an Indication for which the Therapeutic Product is labeled, advertised, marketed, promoted or
intended for use in such country.
1.57 “Global Development Plan” has the meaning set forth in Section 3.2(a).
1.58 “Imaging Agent” means a Lead Candidate containing a diagnostic radioisotope, including a positron
Manufacture and
and/ or gamma-ray emitting radioisotope,
Commercialization by the Parties under the terms of this Agreement for in vivo diagnostic imaging purposes, and for
the avoidance of doubt, not as a therapy for one or more Indications.
which has been selected for Development,
1.59 “IND” means any investigational new drug application filed with the FDA for authorization to
commence clinical studies, and any comparable filings with any Regulatory Authority in any other jurisdiction.
1.60 “IND Acceptance” means the date upon which the first IND filing for the Lead Candidate becomes
effective in accordance with FDA regulations.
1.61 “Indemnified Party” has the meaning set forth in Section 13.3.
***Confidential Treatment Requested.
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1.62 “Indemnifying Party” has the meaning set forth in Section 13.3.
1.63 “Indication” means a discrete clinically recognized form of a disease or any precursor condition
thereof defined histologically or biologically. For the avoidance of doubt, the treatment or prevention of separate
varieties of the same disease or precursor condition will not be a separate Indication, the treatment or prevention of
different stages of the same disease or precursor condition (e.g., lines of therapy) will not be a separate Indication,
and the treatment or prevention of the same disease or medical condition in a different population will not be a
separate Indication (e.g., adult and pediatric).
1.64 “Intellectual Property Right” or “IPR” means all now known or hereafter existing (a) rights
associated with works of authorship throughout the world, including exclusive exploitation rights, copyrights, moral
rights and mask works, (b) internet domain name, trademark, trade dress, and trade name and similar rights, (c) trade
secret rights, (d) Patents, designs, algorithms and other industrial property rights, (e) other intellectual and industrial
property and proprietary rights of every kind and nature throughout the world, arising by operation of law, and (f) all
registrations, applications, renewals, extensions, combinations, divisions or reissues of the foregoing.
1.65 “Joint Inventions” has the meaning set forth in Section 9.2(a).
1.66 “Joint Patents” means a Patent that Covers a Joint Invention.
1.67 “Joint Steering Committee” or “JSC” has the meaning set forth in Section 2.2(a).
1.68 “Know-How” means all confidential and proprietary: commercial, technical, scientific and other
information, trade secrets, knowledge, technology, methods, processes, practices, formulae, instructions, skills,
techniques, procedures, experiences, ideas, inventions, technical assistance, designs, drawings, assembly procedures,
computer programs, specifications, data and results (including biological, chemical, pharmacological, toxicological,
pharmaceutical, physical and analytical, preclinical, clinical, safety, manufacturing and quality control data and
know-how, including study designs and protocols), in all cases, whether or not patented or patentable, in written,
electronic or any other form now known or hereafter developed.
1.69 “Lead Candidate” means, as of the Effective Date, the FAP-Targeting Product identified on
Exhibit 1.69, and/ or any other FAP-Targeting Product identified and agreed by the Parties pursuant to the process
described in Section 3.1. For the avoidance of doubt, the Parties may identify more than one Lead Candidate.
1.70 “Licensed Territory” means all countries in the world other than those in the Retained Territory.
1.71 “Manufacturing” means all activities related to the production, manufacture, processing, filling,
finishing, packaging, labeling, storing and holding of Products or any intermediate thereof, sourcing of any raw
materials or packaging materials with respect to manufacture of Products, qualification and validation, equipment
and facility qualification and validation, commercial manufacture, stability and release testing, quality assurance and
quality control. For clarity, “Manufacture” and “Manufactured” have correlative meanings.
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1.72 “Manufacturing Data” means any and all data, documentation, information and submissions and
communications pertaining to, or made in association with any CMC Activities and/ or Manufacture of the Products
and/ or Backup Candidates (e.g., master batch records, batch records, in-process controls records, drug master file,
Manufacturing process descriptions, release documents, release specifications, release data, process control data,
CMC submission documents and communication with Regulatory Authorities relating thereto), including all CMC
Information, in each case that are generated in the conduct of activities conducted under the Global Development
Plan or otherwise under this Agreement.
1.73 “Manufacturing Documentation” means any and all records and other documentation and
documents which contain Manufacturing Data or are necessary or useful to assume or conduct Manufacture of the
Products and/ or Backup Candidates.
1.74 “Manufacturing Plan” has the meaning set forth in Section 6.2.
1.75 “Marketing Authorization” means approval of an NDA by the FDA or approval of any
corresponding foreign application by the relevant Regulatory Authority in the Licensed Territory.
1.76 “NDA” means a New Drug Application or Supplemental New Drug Application filed with the FDA
(including amendments and supplements thereto).
1.77 “Necessary” means, in relation to Patents, [***]. “Necessity” shall have a correlative meaning.
1.78 “Net Sales” means the gross amount invoiced by or on behalf of Clovis, its Affiliates and their
respective Sublicensees (each, a “Selling Party”) for sales of Product to unaffiliated Third Parties, less the following
deductions if and to the extent they are included in the invoiced gross price of the Product or otherwise directly
incurred by the Selling Party with respect to such sales:
(a) reasonable credits or allowances, if any, on account of price adjustments, recalls, rejection or
return of Product previously sold;
(b) import taxes, export taxes, excises, sales taxes, value added taxes, consumption taxes, duties or
other taxes imposed upon and paid with respect to such sales (excluding income or franchise taxes of any kind) but
only to the extent included in the invoiced sales price;
(c) rebates, trade, quantity and cash discounts;
(d) charges included in the gross sales price for freight, insurance, transportation, postage,
handling and any other charges relating to the sale, transportation, delivery or return of Product to/from (as
applicable) non-Selling Parties; and
(e) any mandatory discounts, rebates or other payments required by Applicable Law, including
any governmental medical assistance programs,
all as determined from the books and records of the Selling Party, maintained in accordance with GAAP or
IFRS (as applicable).
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Product will be considered “sold” when a sale by a Selling Party is recognized in accordance with revenue
recognition policies mandated by GAAP or IFRS (as applicable).
Nothing herein will prevent a Selling Party from selling, distributing or invoicing Product at a discounted
price for shipments to Third Parties in connection with clinical studies, compassionate sales, or an indigent program
or similar bona fide arrangements in which the Selling Party agrees to forego a normal profit margin for good faith
business reasons.
Sale or transfer of Product between any of the Selling Parties will not result in any Net Sales, and Net Sales
instead will be based on subsequent sales or distribution to a non-Selling Party, unless such Product is consumed by a
Selling Party. Sales to Distributors will be treated identically to any other sales to Third Parties.
To the extent that any Selling Party receives consideration other than or in addition to cash upon the sale or
distribution of Product, Net Sales will include the fair market value of such additional consideration.
In the event the Product is sold in a finished dosage form containing the Product in combination with one or
more other active ingredients (a “Combination Product”), the Net Sales of the Product, for the purposes of this
Agreement, will be determined by multiplying the Net Sales (as defined above) of the Combination Product by the
fraction, A/(A+B) where A is the weighted (by sales volume) average sale price in a particular country of the Product
when sold separately in finished form and B is the weighted average sale price in that country of the other product(s)
sold separately in finished form. If such average sale price cannot be determined for both the Product and the other
product(s) in combination, Net Sales for purposes of determining royalty payments will be agreed by the Parties in
good faith based on the relative value contributed by each component.
1.79 [***]
1.80 “Patent” means all: (a) unexpired patents (including inventor’s certificates), including any
substitution, extension, registration, confirmation, reissue, re-examination, supplementary protection certificates,
utility models, petty patents, confirmation patents, patent of additions, renewal or any like filing thereof; (b) pending
applications for patents; and (c) any international counterparts to (a) and (b) above.
1.81 “Patent Challenge” means any proceeding brought by a Third Party that challenges the validity or
enforceability of any Patent, including a Patent Opposition, any other opposition, action for declaratory judgment,
nullity action, interference or other similar attack.
1.82 “Patent Opposition” means, with respect to a Patent in a particular jurisdiction, a proceeding brought
by a Third Party before a patent administrative body (such as the European Patent Office in the EU or the Patent
Trial and Appeal Board in the U.S.) that has authority over such Patent, which is initiated within the first year after
the Patent is granted and that challenges the validity of the Patent.
1.83 “Phase 1 Study” means a clinical study in humans, the principal purpose of which is a preliminary
determination of the safety of the Therapeutic Product in healthy individuals or subjects, as further described in
21 CFR § 312.21(a) (as may be amended), or a similar clinical study in a country other than the U.S.
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1.84 “Phase 2 Study” means a clinical study in humans, the principal purpose of which is a determination
of safety and efficacy of the Therapeutic Product in subjects with the disease or condition under study, as further
described in 21 CFR. § 312.21(b) (as may be amended), or a similar clinical study in a country other than the U.S.
1.85 “Phase 3 Study” means a clinical study in humans evaluating or confirming the safety and efficacy of
the Therapeutic Product that is prospectively designed, statistically powered and conducted to provide an adequate
basis for obtaining regular regulatory approval to market the Therapeutic Product for the treatment of patients with
the disease or condition under study, as further described in 21 CFR § 312.21(c) (as may be amended), or a similar
clinical study in a country other than the U.S.
1.86 “Pre-Clinical Development” means those Development activities performed prior to the filing of an
IND.
1.87 “Pre-Clinical Program Term” means the period from the Effective Date until first IND Acceptance.
1.88 “Product” means one or more Imaging Agents, one or more Therapeutic Products, or both forms as
the context may require. For the avoidance of doubt, the use of the term ‘Product’ in this Agreement does not
preclude that more than one Product is Developed, Manufactured and/ or Commercialized under this Agreement and
each Imaging Agent and/ or Therapeutic Product which includes a different FAP-Targeting Product or a different
radioisotope shall be considered a separate ‘Product’ for the purposes of this Agreement.
1.89 “Product Infringement” has the meaning set forth in Section 9.6(a).
1.90 “Product Marks” has the meaning set forth in Section 5.3.
1.91 “Quality Agreement” has the meaning set forth in Section 6.1.
1.92 “Regulatory Approval” means, with respect to a country or supra-national territory, any and all
approvals, licenses, registrations or authorizations of any Regulatory Authority necessary in order to commercially
distribute, sell or market a product in such country or some or all of such supra-national territory, including
Marketing Authorizations.
1.93 “Regulatory Authority” means any national, multi-national, supranational, federal, state, local,
municipal, provincial or other government authority of any nature (including any governmental division, prefecture,
subdivision, department, agency, bureau, branch, office, commission, council, court or other tribunal) as well as any
ethics committees/ IRBs.
1.94 “Regulatory Documentation” means regulatory applications, submissions, notifications,
registrations, Regulatory Approvals, or other approvals granted by, and/or filings made to or written communication
with a Regulatory Authority that are necessary or useful to Develop, Manufacture, market, sell or otherwise
Commercialize a Product in a country or regulatory jurisdiction.
1.95 “Retained Territory” means (a) all countries within the geographical area of Europe, which ends in
the west at the Atlantic ocean and in the east at the border to the Republic of Turkey, (e.g., the EU, the United
Kingdom (in the event it is no longer a member of the EU),
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Norway, Switzerland, Island, Liechtenstein), (b) the Russian Federation, (c) the Republic of Turkey, and (d) the State
of Israel, in each case (a) to (d) including its territories and possessions.
1.96 “Retained Territory Additional Studies” has the meaning set forth in Section 3.3(a).
1.97 “Retained Territory-Specific Study Elements” has the meaning set forth in Section 3.3(b).
1.98 “Royalty Term” means, on a country-by-country basis, the period commencing on the First
Commercial Sale of a Product in a country in the Licensed Territory by Clovis, its Affiliates or Sublicensees and
expiring on the later of: (a) [***] ([***]) years following such date in such country; or (b) the later of expiration of
(i) the last Valid Claim of any 3BP Patent, and (ii) Data Exclusivity relating to the Product.
1.99 “Safety Data Exchange Agreement” has the meaning set forth in Section 4.6.
1.100 “Selling Party” has the meaning set forth in Section 1.78.
1.101 “Sole Inventions” has the meaning set forth in Section 9.2(a).
1.102 [***]
1.103 [***]
1.104 “Study Initiation” means the first visit of the first patient enrolled in a given clinical study during
which the Therapeutic Product is administered in accordance with the protocol.
1.105 “Sublicense” has the meaning set forth in Section 7.1(c).
1.106 “Sublicensee” means any Third Party that is granted a Sublicense, either directly by Clovis or its
Affiliates or indirectly by any other Sublicensee hereunder; provided, however, that the term “Sublicensee” does not
include Distributors.
1.107 “Sublicense Revenue” means license fees, upfront fees, access fees, option fees, milestone payments
(only amounts tied to events not defined as Milestone Events or in excess of Milestone Payments hereunder) and any
other consideration (including non-monetary consideration as valued at the fair market value cash equivalent) paid
to, or otherwise received by, Clovis or any of its Affiliates from a Sublicensee in consideration for the grant of a
Sublicense; [***]. For the avoidance of doubt, in contrast to (ii) above, royalties measured on Net Sales of Imaging
Agents by a Sublicensee as a Selling Party that are payable to Clovis or its Affiliates under a Sublicense are included
in the definition of Sublicense Revenues.
1.108 “Supply Agreement” has the meaning set forth in Section 6.1.
1.109 “Term” has the meaning set forth in Section 11.1.
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1.110 “Therapeutic Product” means a Lead Candidate containing a therapeutic radioisotope, including an
electron and/ or alpha-particle emitting radioisotope, which has been selected for Development, Manufacture and
Commercialization by the Parties under the terms of this Agreement as a therapy for one or more Indications.
1.111 “Third Party” means any person or entity other than: (a) 3BP; (b) Clovis; or (c) an Affiliate of either
Party.
1.112 “Transfer Price” means (i) the fully-burdened cost charged by a Contract Manufacturer of Clovis to
Clovis or its Affiliates for the Manufacture and supply to Clovis or its Affiliates of a Product (or component thereof),
plus [***] percent ([***]%), or (ii) in the event of Manufacture of the Product by Clovis or its Affiliates, the internal,
arm’s length transfer price charged between Clovis and its Affiliates for supply from Clovis to its Affiliate (or vice
versa) or if no transfer between Clovis and its Affiliates is made, a price that would be charged if such internal
transfer was made.
1.113 “U.S.” means the United States of America, including all possessions and territories thereof.
1.114 “Valid Claim” means any claim of (a) any issued and unexpired patent that has not been (i) revoked
or held unenforceable, unpatentable or invalid by a government authority or court of competent jurisdiction in a
decision that is not appealable or that has not been appealed within the time allowed for appeal or (ii) abandoned,
disclaimed, denied or admitted to be invalid or unenforceable through reissue, re-examination or disclaimer or
otherwise; or (b) any patent application that has not been (i) cancelled, withdrawn or abandoned without being refiled
in another application in the applicable jurisdiction or (ii) finally rejected by an administrative agency or government
authority or court of competent jurisdiction in a decision that is not appealable or that has not been appealed within
the time allowed for appeal.
2. SUBJECT-MATTER; GOVERNANCE
2.1 Subject-Matter; Overview. Subject-matter of this Agreement is the grant of rights by 3BP to Clovis
to Develop and Manufacture Products in or for and Commercialize Products in the Licensed Territory and the
collaboration with respect to the Development, Manufacture and Commercialization of Products globally, with 3BP
retaining rights to Develop and Manufacture the Products in or for and Commercialize the Products in the Retained
Territory (the “Collaboration”). The Parties will establish a Joint Steering Committee as described in this Article 2
and may from time-to-time establish other committees or sub-committees to report to the Joint Steering Committee
to effectively implement the Collaboration as jointly agreed by the Parties.
2.2 Joint Steering Committee.
(a) Establishment. Within thirty (30) days after the Effective Date, the Parties will establish a
joint steering committee (the “Joint Steering Committee” or “JSC”) to monitor, coordinate, and oversee the
Development and Manufacture of Products under this Agreement. The JSC membership and procedures are further
described in Section 2.4.
(b) Specific Responsibilities of the JSC. The JSC will in particular, in accordance with the
decision-making principles set forth in Section 2.5:
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(i) provide a forum for and facilitate communications between the Parties with respect to
the Development and Manufacture of the Products, including any additional Indications proposed by either Party to
be pursued;
Global Development Plan agreed to by the Parties;
(ii) coordinate the activities of the Parties under and oversee the implementation of the
(iii) approve the selection of one or more Lead Candidates and one or more Backup
Candidates and the designation of any Backup Candidate as a new Lead Candidate for continued Development, the
de-ranking of a Lead Candidate to a Backup Candidate or the complete abandonment of a Lead Candidate or Backup
Candidate;
(iv) review and approve annual and interim updates to the Global Development Plan;
(v) review and approve the Manufacturing Plan and any annual or interim updates and
proposed amendments thereto;
Development to be performed by Third Party subcontractors and the scope of work assigned to such Third Parties;
(vi) review and approve the budget for Development Costs associated with Pre-Clinical
(vii) review Development Data generated in the conduct of activities under the Global
Development Plan as it becomes available, and establish plans for the periodic sharing of Development Data between
the Parties;
Products under the Global Development Plan;
(viii) monitor and coordinate all regulatory actions, communications and submissions for
initiated research involving the Products;
(ix) establish a process for considering compassionate use proposals and investigator
(x) discuss and agree upon the details of the Development by the Parties of an Imaging
Agent;
the JSC within the scope of the JSC’s authorities;
(xi) establish other Committees delegated to carry out specific tasks assigned to them by
in accordance with Section 2.5; and
(xii) attempt to resolve issues presented to it by, and disputes within, the other Committees
(xiii) perform such other duties as are expressly assigned to the JSC in this Agreement and
perform such other functions as appropriate to further the purposes of this Agreement as may be allocated to it by
written agreement of the Parties.
2.3 Alliance Manager. Within thirty (30) after the Effective Date, each Party will appoint and notify
the other Party of the identity of a representative to act as its alliance manager under this Agreement (the “Alliance
Manager”). The Alliance Managers will serve as the primary contact points between the Parties for providing each
Party with information on the progress of each Party’s Development and business-related activities under this
Agreement. The Alliance Managers will also be primarily responsible for facilitating the flow of information and
otherwise promoting communication, coordination and collaboration between
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the Parties. The Alliance Managers (or their designees for a particular meeting) will attend all JSC meetings, have the
right to attend all other Committee meetings, and support the co-chairpersons of each Committee in the discharge of
their responsibilities. An Alliance Manager may also bring any matter in relation to the Development or Manufacture
to the attention of any Committee if such Alliance Manager reasonably believes that such matter warrants such
attention. Each Party may replace its Alliance Manager at any time upon written notice to the other Party.
2.4 General Committee Membership and Procedures.
(a) Membership. Each of Clovis and 3BP will designate representatives to serve as members of
each Committee, and each representative may serve on more than one Committee as appropriate. Each Party will
have an equal number of representatives on each Committee. Each Party may replace its Committee representatives
at any time upon written notice to the other Party. Each Committee will have co-chairpersons. Clovis and 3BP will
each select from their representatives a co-chairperson for each of the Committees, and each Party may change its
designated co-chairpersons from time to time upon written notice to the other Party. The co-chairpersons of each
Committee will be responsible for calling meetings and preparing and circulating meeting agendas and minutes, but
the co-chairpersons will have no additional powers or rights beyond those held by other Committee members.
(b) Meetings. Each Committee will hold meetings at such times as it elects to do so, provided
that unless the Parties otherwise agree in writing to a different frequency for such meetings, the JSC will meet at least
[***] ([***]) times each Calendar Year. Either Party may also call a special meeting of a Committee (by
videoconference or teleconference) by written notice to the other Party in the event such Party reasonably believes
that a significant matter must be addressed prior to the next regularly scheduled meeting. Unless a significant matter
requires more urgent consideration by a Committee, the Party calling for a special meeting will provide the
applicable Committee no later than [***] ([***]) Business Days prior to the special meeting with materials reasonably
adequate to enable an informed decision at such meeting. No later than [***] ([***]) Business Days prior to any
Committee meeting, the co-chairpersons of such Committee will prepare and circulate an agenda for such meeting;
provided, however, that either Party may propose additional topics to be included on such agenda, either prior to or in
the course of such meeting. Each Committee may invite non-members (including consultants and advisors of a Party
who are under an obligation of confidentiality consistent with this Agreement) to participate in its meetings; provided
that such non-member participants will have no voting authority at such meetings and may be excluded by either
Party if there is an actual or potential conflict of interest. Each Committee may meet in person, by videoconference
or by teleconference; provided, however, that at least one (1) meeting of each Committee per Calendar Year will be
in person unless the Parties mutually agree in writing to waive such requirement. In-person Committee meetings will
be held alternately in Boulder, Colorado or Bay Area, California and Berlin, Germany, or such other location as may
be mutually agreed by the Parties. Each Party will bear the expense of its respective Committee members’
participation in Committee meetings. Committee meetings will be effective only if at least one (1) representative of
each Party is present or participating in such meeting. The co-chairpersons of a Committee will be responsible for
preparing reasonably detailed written minutes of all meetings of such Committee that reflect all material decisions
made at such meetings. The co-chairpersons will send draft meeting minutes to each member of such Committee for
review and approval promptly after each Committee meeting. Such minutes will
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be deemed approved unless one or more members of such Committee objects to the accuracy of such minutes within
[***] ([***]) days of receipt by such member.
2.5 Decision Making.
(a) Within JSC and Operating Committees. All decisions within the JSC or any other
Committee will be made by consensus, with each Party having collectively one (1) vote. If a dispute arises which
cannot be resolved within any Committee other than the JSC, the representatives of either Party may cause such
dispute to be referred to the JSC for resolution. If after reasonable discussion and good faith consideration of the
other Party’s views on a particular matter before the JSC, including any disputes referred to the JSC by another
Committee, the JSC is still unable to reach a unanimous decision on such matter for a period of [***] ([***]) days
from referral to the JSC (if referred by a Committee) or start of discussions within the JSC (if originally within the
JSC), then either Party may upon notice to the other Party cause such dispute to be referred to the Executive Officers
of the Parties for resolution as provided in Section 2.5(b) below.
(b) Executive Officers. Upon being referred a disputed matter from the JSC under
Section 2.5(a), the Executive Officers of each Party will consider such matter and discuss it in good faith within
[***] ([***]) days after notice of such matter is received, including at least one (1) in person meeting of the
Executive Officers within [***] ([***]) days after such notice is received, unless the Executive Officers agree in
writing to waive such requirement. If the Executive Officers are not able to resolve such disputed matter within the
afore [***] ([***]) days and either Party wishes to pursue the matter, then:
(i) Clovis will have the right to decide such dispute if such matter relates to: [***] and
(ii) 3BP will have the right to decide such dispute if such matter relates to: [***]
(c) Exceptions. Neither Party will be permitted to use its final decision-making authority to
impose any obligations or costs on the other Party.
(d) Limitations of Committee Authority. Each Committee will have solely the powers
expressly assigned to it in this Article 2 and elsewhere in this Agreement or as otherwise agreed to by the Parties in
writing. A Committee will not have any power to amend, modify, or waive compliance with the terms of this
Agreement. It is expressly understood and agreed that the control of decision-making authority by 3BP or Clovis, as
applicable, pursuant to this Section 2.5, so as to resolve a disagreement or deadlock on a Committee or between the
Executive Officers for any matter will not authorize either Party to unilaterally modify or amend, or waive its own
compliance with, the terms of this Agreement.
(e) Good Faith. In conducting themselves on Committees, and in exercising their rights under
this Section 2.5, all representatives of both Parties will use reasonable efforts to consider, reasonably and in good
faith, all input received from the other Party, and to reach consensus on all matters before them. Notwithstanding
anything to the contrary in this Agreement, neither Party nor any of its Affiliates will be required to take, or will be
penalized for not taking, any action that is not in compliance with such Party’s general ethical business practices and
policies to the extent reasonable and as can be demonstrated or
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that such Party reasonably believes and demonstrates is not in compliance with Applicable Laws.
2.6 Discontinuation of a Committee.
(a) Each Committee, including the JSC, will continue to exist until the Parties mutually agreeing
to disband the Committee.
(b) Once the JSC or any other Committee is disbanded in accordance with Section 2.6(a), such
Committee will have no further obligations under this Agreement and, thereafter, the Alliance Managers will be the
contact persons for the exchange of information under this Agreement, and decisions of such Committee will be
decisions of the responsible Party as specified in this Agreement, subject to any other terms of this Agreement.
2.7 Compliance with Law. Each Party and its Affiliates will comply in all material respects with all
Applicable Laws in the Development, Manufacture, and Commercialization of Products performed under this
Agreement.
3. DEVELOPMENT OF PRODUCTS
3.1 General. The Parties agree that this Agreement covers the Development of one or more Lead
Candidates and, if so decided, one or more Backup Candidates, all in accordance with the Global Development Plan,
including Pre-Clinical Development by 3BP of the Lead Candidate set forth in Exhibit 1.69, Development by Clovis
of a Lead Candidate as a Therapeutic Product and/ or an Imaging Agent and, subject to Section 3.6 below, if so
decided by 3BP, the Development by 3BP of a Lead Candidate as an Imaging Agent. Either Party may recommend
that a Backup Candidate should be designated as a replacement or additional Lead Candidate, in which case, such
Party will provide the JSC with any data or publications supporting any such proposal. A Backup Candidate will
become a replacement or additional Lead Candidate only with the approval of the JSC and is subject to appropriate
amendments to the Global Development Plan necessary for the Development of such Backup Candidate as a
replacement or additional Lead Candidate and, upon such approval by the JSC and corresponding amendment of the
Global Development Plan, the Backup Candidate shall no longer be a Backup Candidate but will solely be a Lead
Candidate. Clovis will be solely responsible for determining what Development activities are necessary to support
Regulatory Approval for a Product in the Licensed Territory. 3BP acknowledges that Clovis’ proposed clinical
Development program will be primarily focused on obtaining Development Data that is sufficient to support
Regulatory Approval of Products in the Licensed Territory. While 3BP will be entitled to use such Development
Data to seek, at 3BP’s discretion, Regulatory Approval for Products in the Retained Territory, 3BP will be solely
responsible for determining what additional Development activities (that is, in addition to those undertaken by
Clovis) may be necessary to support Regulatory Approval for each Product in the Retained Territory. Unless
otherwise specified in the Global Development Plan or under this Agreement, each Party will be responsible and
have the final decision-making authority and financial responsibility for all Development activities it conducts
pursuant to this Agreement.
3.2 Global Development Plan; Other Development Aspects.
(a) Global Development Plan. The Development of Products under this Agreement will be
conducted pursuant to a written development plan (the “Global Development Plan”). The Global Development Plan
will set forth the specific activities
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(research, pre-clinical, non-clinical, and clinical) to be conducted by each Party and the estimated timeline for
Development (inclusive of Pre-Clinical Development activities) of each Lead Candidate, Therapeutic Product,
Backup Candidate (including components thereof), and Imaging Agent, as the case may be, to obtain Development
Data that the Parties intend will be useful, by both Parties, to obtain Regulatory Approvals of the Products by
Regulatory Authorities in the Licensed Territory and Retained Territory. The Global Development Plan will also
specify the plans and estimated timeline for preparing the necessary Regulatory Documentation for obtaining
Regulatory Approval in such territories, subject to Section 4.1. The initial version of the Global Development Plan is
attached as Exhibit 3.2(a) to be amended from time to time upon agreement of the Parties through the JSC.
(b) Pre-Clinical Development. During the Pre-Clinical Program Term, 3BP will conduct the Pre-
Clinical Development activities assigned to 3BP in the Global Development Plan for the Lead Candidate set forth in
Exhibit 1.69 and other Lead Candidates as agreed in accordance with the process in Sections 2.2(b), 2.5(b), 2.5(c)
and 3.1 (and any Backup Candidates, as applicable) in accordance with the timelines stated therein. 3BP may utilize
Third Party subcontractors to perform certain of its Pre-Clinical Development activities, in connection with which
the Parties will prepare for approval by the JSC a budget for the Development Costs anticipated to be incurred by
3BP through its Third Party subcontractors. In support of 3BP’s Pre-Clinical Development activities, Clovis agrees
to pay 3BP in accordance with the terms of Section 8.2 the FTE Costs for up to [***] ([***]) FTEs of 3BP who are
devoted to conducting such work and agrees to pay in accordance with the terms of Section 8.3(a) the costs of any
Third Party subcontractor engaged by 3BP in the Pre-Clinical Development activities, provided such subcontractor is
expressly mentioned in the Global Development Plan and such costs are incurred in accordance the above-mentioned
budget approved by the JSC.
(c) Clinical Studies. Each clinical study to be conducted by either Party to generate Development
Data to support Regulatory Approvals for the Products will be described in the Global Development Plan. Unless
otherwise agreed by the Parties pursuant to the Global Development Plan and subject to Section 3.3, Clovis will be
the sponsor of all clinical studies and will be solely responsible for all clinical Development activities, including all
activities to support Regulatory Approval for the Product in the Licensed Territory. If a Party (including through its
Affiliates or sublicensees) intends to sponsor and conduct one or more additional human clinical studies (beyond
what is then included in the Global Development Plan) for Development of a Product, either in an Indication already
covered by the Global Development Plan or in a new Indication, such Party will notify the other of such proposed
studies and provide the other Party of any data or publications supporting any such proposal. In such event, the JSC
will consider such proposal and evaluate the supporting data and information in good faith, and subject to JSC’s
approval of the proposal, the Global Development Plan will be amended to include such additional study or studies.
A clinical study may include trial sites in the other Party’s territory; provided that the inclusion of such sites was
approved by the JSC at the time such study was incorporated into the Global Development Plan or is subsequently
approved by the JSC through an amendment to the Global Development Plan.
(d) Development Costs. Unless otherwise agreed by the Parties in writing, in particular if the
Parties agree in writing to share Development Costs, (i) Clovis will be responsible for: (A) all Development Costs
incurred by either Party for Development activities conducted pursuant to the Global Development Plan, including
costs of clinical studies for which Clovis is the sponsor, but excluding all Development Costs for which 3BP is
responsible
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pursuant to (ii) below; and (B) the FTE Costs and Third Party subcontractor costs for which Clovis is responsible
pursuant to Section 3.2(b) above, and (ii) 3BP will be solely responsible for (A) all such Development Costs
incurred by or on behalf of 3BP for Pre-Clinical Development conducted by 3BP pursuant to the Global
Development Plan (subject to the payment/ reimbursement set forth in Section 3.2(b) and Section 8.2); (B) all
Development Costs arising from Retained Territory Additional Studies and Development Costs associated with
Retained Territory-Specific Study Elements, as described in more detail in Section 3.3; and (C) any Development
Costs for which 3BP agrees to be responsible pursuant to the Global Development Plan with respect to the
Development of an Imaging Agent pursuant to Section 3.6.
(e) Status Reports. Each Party will provide the other Party and the JSC with regular written
reports setting forth its Development activities under the Global Development Plan and the status and outcome of
such activities, including an overview of results of such activities, at each regularly scheduled JSC meeting.
(f) Amendments to Global Development Plan. Beginning with the first full Calendar Year
following the Effective Date, on an annual basis (no later than June 30th), or more often as the JSC deems
appropriate, the JSC will review, approve, and, as required, prepare an update and amendment to the Global
Development Plan. Each such updated and amended Global Development Plan will reflect, among others, any
changes, additions, re-prioritization of studies and/or Indications within, and/or reallocation of resources with respect
to, the Development of the Products. Once approved by the JSC, an amended Global Development Plan will become
effective and supersede the previous Global Development Plan as of the date of such approval.
3.3 Retained Territory Additional Studies and Retained Territory-Specific Study Elements.
(a) 3BP will be solely responsible for seeking Regulatory Approval for Products in the Retained
Territory at its sole discretion. If 3BP elects to seek Regulatory Approval of any Product in the Retained Territory,
3BP may use all Development Data generated by or on behalf Clovis, its Affiliates or Sublicensees in 3BP’s
Development activities, including in support of Regulatory Approvals (if any) pursued by 3BP in the Retained
Territory, such that any clinical Development conducted by 3BP can or may be limited to that which relates solely to
those elements of Development that are required additionally and specifically in order to support Regulatory
Approval for a Product in the Retained Territory. If 3BP determines, in its sole discretion that unique data is
necessary to support Regulatory Approval for any Product in the Retained Territory, 3BP will be the sponsor of those
clinical studies that are conducted to obtain data which is solely and specifically necessary to support such
Regulatory Approval in the Retained Territory (that is, which data is not necessary to support Regulatory Approval
in the Licensed Territory) and which data is not obtained under the clinical studies conducted by or on behalf of
Clovis (the “Retained Territory Additional Studies”). A Retained Territory Additional Study may be conducted at
sites within the Licensed Territory if such study is agreed by the Parties to be included within the Global
Development Plan; otherwise, 3BP is free to sponsor and conduct a Retained Territory Additional Study solely
within the Retained Territory.
(b) Notwithstanding Section 3.3(a) above, 3BP will have the right to request that the study design
of a clinical study sponsored by Clovis for a Product pursuant to Section 3.2(c) include elements intended to generate
Development Data solely necessary and
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specific to supporting Development activities of 3BP and/ or Regulatory Approval of such Product in the Retained
Territory (“Retained Territory-Specific Study Elements”). In such event, Clovis will reasonably consider the
request and generate an estimate of the Development Costs associated with the Retained Territory-Specific Study
Elements. If 3BP agrees to be responsible for the associated Development Costs and Clovis agrees, which agreement
shall not be unreasonably withheld, to revise its study design to include the requested protocol elements, then the
study design will be revised and captured in the Global Development Plan accordingly.
3.4 Development Diligence; Standards of Conduct. Each Party will use Diligent Efforts to Develop
the Lead Candidates and carry out the activities assigned to it under the Global Development Plan, provided that 3BP
is under no obligation to conduct Retained Territory Additional Studies and/ or request the inclusion of Retained
Territory-Specific Study Elements. The Parties acknowledge and agree that the Global Development Plan or any
other Development activities may consist of consecutive phases or stages and that the determination that the outcome
of any given phase or stage is successful may be required or commercially reasonable prior to moving to the
subsequent phase or stage.
3.5 Development Records. Each Party will (and will cause its Affiliates and sublicensees to)
maintain complete and accurate records (in the form of technical notebooks and/or electronic files where appropriate)
of all work conducted by it or on its behalf (including by Affiliates and sublicensees) under the Global Development
Plan. Such records, including any electronic files where such information may also be contained, will accurately
reflect all work done and results achieved in the performance of the Global Development Plan in sufficient detail and
in good scientific manner appropriate for Patent and regulatory purposes. Each Party will have the right to review
and receive a copy of such records (including a copy of the databases) maintained by the other Party (including its
Affiliates and sublicensees) at reasonable times, but no less than [***] in any one Calendar Year, and to obtain
access to source documents to the extent needed for Patent or regulatory purposes, for other legal proceedings or to
exercise any rights granted to a Party under this Agreement, including the right of use of Development Data. The
Parties may agree to set up an electronic data room in order to manage the exchange of information in a secure
manner.
3.6 Imaging Agent. The Parties acknowledge that the Development of a specific Imaging Agent may
be beneficial or required from a commercial perspective. 3BP will prepare a concept regarding the Development of
such an Imaging Agent for discussion by the JSC. If agreed by the Parties, the Global Development Plan may be
amended to incorporate the agreed plan for Development of such Imaging Agent and describe each Party’s
responsibilities with respect to the Development and Manufacture of the agreed Imaging Agent, including
responsibility for the Development Costs associated therewith.
3.7 Subcontracts. Each Party may perform any of its obligations under this Agreement through one
or more subcontractors and consultants and will provide information in that regard to the JSC, provided that: (a) such
Party remains responsible for the work allocated to, and payment to, such subcontractors and consultants as it selects
to the same extent it would if it had done such work itself; (b) the subcontractors and consultants undertake in writing
obligations of confidentiality and non-use regarding Confidential Information that are substantially the same as those
undertaken by the Parties pursuant to Article 10 hereof; (c) subject to Sections 6.4(c)(ii) and 6.5(e), the
subcontractors and consultants execute an agreement requiring the assignment of all Intellectual Property Rights
relating to the Product and/ or Backup Candidates developed in the course of performing any such work to the Party
***Confidential Treatment Requested.
20
retaining such subcontractors or consultants; and (d) any subcontracting by a Party shall not diminish or limit the
rights of the other Party set forth in this Agreement with respect to the use of Development Data, Regulatory
Documentation, Manufacturing Data and Manufacturing Documentation generated on behalf of a Party by a Third
Party subcontractor or consultant.
3.8 Personnel. All employees, representatives and agents of each Party and its Affiliates conducting
activities under this Agreement will, prior to commencing any such activities, have executed an agreement requiring
the assignment of any work-related inventions and related Intellectual Property Rights to the Party by whom they are
employed or for whom they are providing services (or its designated Affiliate). The Parties acknowledge and agree
that this Agreement will be deemed to be a joint research agreement under 35 U.S.C. §102(c).
4. REGULATORY MATTERS
4.1 Responsible Regulatory Party. Unless to the extent otherwise provided in the Global Development
Plan and subject to Section 2.5, (a) Clovis will be solely responsible and have the final authority with respect to
regulatory activities to obtain Regulatory Approval for Products in the Licensed Territory and (b) 3BP will be solely
responsible and have the final authority with respect to all regulatory activities to obtain Regulatory Approval for
Products in the Retained Territory. [***].
4.2 Ownership of Regulatory Dossier. Clovis will own all Regulatory Documentation for the Products
in the Licensed Territory and 3BP will own all Regulatory Documentation for the Products in the Retained Territory,
for all Indications.
4.3 Regulatory Rights and Responsibilities. For each Product it Develops hereunder, Clovis will use
Diligent Efforts to prepare and file all necessary Regulatory Documentation with Regulatory Authorities in
accordance with its responsibilities set forth in the Global Development Plan. In the event 3BP elects to seek
Regulatory Approval of any Product in the Retained Territory, 3BP may (but is not obligated to) use Diligent Efforts
to prepare and file all necessary Regulatory Documentation with Regulatory Authorities in the Retained Territory.
Each Party will, unless prohibited by Applicable Law, keep the other Party informed of material regulatory
developments relating to the Products in its respective territory through regular reports at the JSC meetings. Each
Party will inform the other Party of any Regulatory Documentation submitted to or received from any Regulatory
Authorities that may impact obtaining or maintaining Regulatory Approval for the Product in the other Party’s
territory.
4.4 Know-How Transfer; Rights of Reference; Use of Data.
(a) During the Term, each Party will disclose and make available to the other Party, for use by the
other Party in accordance with this Agreement, all Development Data generated under the Global Development Plan
in accordance with the data sharing plans established by the JSC. For the avoidance of doubt, the disclosure of
Development Data shall not be deemed to be a transfer of property rights in such Development Data, and each Party
shall have only those rights as are granted to it pursuant to this Agreement.
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(b) Each Party (and its Affiliates and sublicensees) will have the right to cross reference, file or
incorporate by reference any Regulatory Documentation filed by the other Party or its Affiliates for the Product in
order to enable such Party (and its Affiliates and sublicensees) to Develop the Product in or for (including to obtain
Regulatory Approval), Manufacture the Product in or for, and Commercialize the Product in its respective territory.
Each Party will, on written request by the other Party, provide to the other Party and to any specified Regulatory
Authority a letter, in the form reasonably required by the other Party, acknowledging that the other Party (or its
Affiliates and sublicensees) has the above right of reference to any such Regulatory Documentation.
4.5 Recalls. Any decision to initiate a recall or withdrawal of a Product from the market prior to
receipt of Regulatory Approval (that is, during clinical studies) will be made by the Party who sponsors the study and
any decision to initiate a recall or withdrawal of a Product from the market after receipt of Regulatory Approval will
be made by Clovis in the Licensed Territory and by 3BP in the Retained Territory; provided that the Parties will
discuss in good faith and coordinate their efforts with respect to any such recalls. In the event of any recall or
withdrawal, such Party will take all action necessary to implement such recall or withdrawal in accordance with
Applicable Laws, with assistance from the other Party as reasonably requested by the deciding Party. The costs of
any such recall or withdrawal will be borne solely by the deciding Party, subject to the provisions of Article 13.
4.6 Safety Data Exchange Agreement. Prior to 3BP commencing any clinical studies of Products as
sponsor pursuant to the Global Development Plan or the provisions in Section 3.3(a), the pharmacovigilance
departments of both Parties will meet and agree on a safety data exchange agreement (“Safety Data Exchange
Agreement”).
5. COMMERCIALIZATION
5.1 Overview. Clovis will have sole control and responsibility for the Commercialization of Products
in the Licensed Territory and will bear all costs and expenses associated with the Commercialization of Products in
the Licensed Territory; and 3BP will have sole control and responsibility for the Commercialization of Products in
the Retained Territory and will bear all costs and expenses associated with the Commercialization of Products in the
Retained Territory.
5.2 Ex-Territory Sales. Neither Party (and their respective sublicensees or Affiliates) will engage in
any advertising or promotional activities relating to the Products directed primarily to customers or other buyers or
users of the Products located outside its territory or, subject to Applicable Laws, accept orders for Products from or
sell Products into such other Party’s territory.
5.3 Trademarks. Clovis will have the right to brand the Products in the Licensed Territory using
trademarks and trade names it determines appropriate for the Products, which may vary by country or within a
country (“Product Marks”). 3BP will be free to select, create and use its own trademarks for its use, in connection
with the Products in the Retained Territory. 3BP will not, and will ensure that its Affiliates and sublicensees will not,
make any use of the trademarks, including the Product Marks, or house marks of Clovis or its Affiliates or
Sublicensees (including their corporate names) or any trademark confusingly similar thereto. Notwithstanding the
foregoing, 3BP may notify Clovis in writing of 3BP’s interest in using the Product Marks to Commercialize the
Products in the Retained Territory; in such event, Clovis will grant to 3BP pursuant to a written agreement the
royalty-free, fully
***Confidential Treatment Requested.
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paid-up, sublicensable right to use the Product Marks to Commercialize the Products in the Retained Territory.
Clovis will own all rights in the Product Marks and will register and maintain the Product Marks in the Licensed
Territory as it determines reasonably necessary at its own cost and expense.
5.4 Commercial Diligence. During the Term, Clovis will use Diligent Efforts to Commercialize the
Products in the Licensed Territory. [***].
5.5 Reporting. Clovis will provide 3BP with written reports, on a country-by-country and Product-
by-Product basis, no less frequently than [***] following receipt of the initial Marketing Authorization summarizing
Clovis’ (and its Affiliates’ and Sublicensees’) efforts to seek Regulatory Approval for and Commercialize the
Products in the Licensed Territory. All such reports will be considered Confidential Information of Clovis.
6. MANUFACTURING
6.1 Overview. In general and subject to the terms of this Agreement, (a) 3BP will be responsible for all
Manufacture activities to support Development activities allocated to 3BP under the Global Development Plan or the
Manufacturing Plan, including Manufacturing the Lead Candidate set forth in Exhibit 1.69 for Pre-Clinical
Development activities (including CMC Activities) to the extent set forth in the Global Development Plan and/ or
Manufacturing Plan, (b) Clovis will be responsible for all Manufacturing activities to support Development activities
allocated to Clovis under the Global Development Plan and/ or the Manufacturing Plan; provided that upon
completion of all transfer of technology contemplated in Section 6.3, but subject to 3BP’s rights set forth in
Sections 6.4 and 6.5, Clovis will be solely responsible for the Manufacture and supply of all Products for
Development activities under the Global Development Plan, unless otherwise set forth in the Global Development
Plan, and (c) each Party will be responsible, but subject to Sections 6.4 and 6.5, for Manufacturing the Product for
Commercialization in its respective territory. With oversight by the JSC, the Parties will collaborate to identify
Contract Manufacturers having appropriate capabilities for the Manufacture of all components of the Product;
provided that Clovis will have the deciding vote and, upon such decision, the right and authority to appoint and enter
into agreements with Contract Manufacturers as provided in Section 6.4 to support Development activities
undertaken by Clovis in or for, and/ or Commercialization of Product in, the Licensed Territory, subject however to
the more detailed provisions in Section 6.4.
6.2 Manufacturing Plan. The Parties will establish a plan (the “Manufacturing Plan”) which shall
describe: (i) all CMC Activities, including process development and scale-up, and any other matters related to the
Manufacture of the Products; and (ii) all activities necessary or useful to transfer the 3BP Know-How and to enable
Clovis, its Affiliates, or each Contract Manufacturer (as appropriate) to Manufacture the Product, at Clovis’ request,
in accordance with Section 6.3. The Parties will make good faith efforts to establish the first Manufacturing Plan
and have it approved by the JSC within ninety (90) days after the Effective Date. The Manufacturing Plan so agreed
upon shall be attached as Exhibit 6.2 to this Agreement, to be amended from time to time upon agreement of the
Parties through the JSC.
6.3 Transfer of 3BP Know-How and Manufacturing Technology. Upon Clovis’ request, 3BP, at
Clovis’ cost and expense, will (and make Diligent Efforts to cause 3BP’s
***Confidential Treatment Requested.
23
Contract Manufacturer to) promptly disclose (and provide copies, as applicable) to either Clovis or a Contract
Manufacturer selected by Clovis, all 3BP Know-How existing by then and necessary or useful to enable Clovis or
such Contract Manufacturer (as appropriate) to Manufacture the Lead Candidate set forth in Exhibit 1.69 and the
Backup Candidate set forth in Exhibit 1.10. For clarity, nothing in this Section 6.3 with respect to 3BP’s obligation
to transfer 3BP Know-How to Clovis will limit 3BP’s right to use any such 3BP Know-How to fulfill 3BP’s
obligations under this Agreement or exercise any rights retained by or granted to 3BP under this Agreement. In
addition, 3BP will (and make Diligent Efforts to cause its Contract Manufacturer to) make available to Clovis, on a
reasonable consultation basis, advice of its technical personnel at Clovis’ expense as may reasonably be requested by
Clovis in connection with such transfer of 3BP Know-How, including that Clovis will reimburse 3BP for reasonable
travel expenses incurred by personnel of 3BP and/ or Contract Manufacturers of 3BP while rendering services at the
request of Clovis under this Section 6.3.
6.4 Clovis Contract Manufacturers.
(a) Clovis has the right to appoint one or more Contract Manufacturers for supply to Clovis and,
under the conditions set forth in Section 6.5(b) or 6.5(c) to 3BP, but who itself is not a “Sublicensee” hereunder and
thereby exercises “have made” rights granted by 3BP to Clovis under Section 7.1(a)(ii). Clovis will disclose to 3BP
any agreements concluded with Contract Manufacturers.
(b) Clovis will be responsible for any such Contract Manufacturer hereunder and will ensure in its
agreement with each Contract Manufacturer that such agreement is consistent with the relevant terms of this this
Agreement.
(c) Notwithstanding the generality of subclause (b),
(i) Clovis will require any such Contract Manufacturer to agree in writing to comply with
the obligations of confidentiality and non-use regarding Confidential Information that are substantially the same as
those undertaken by the Parties pursuant Article 10;
(ii) Clovis will require that any such Contract Manufacturer agree in writing to assign and
transfer to Clovis all rights in and/ or to all Manufacturing Data generated by such Contract Manufacturer, and all
Patents and other Intellectual Property Rights generated by such Contract Manufacturer that are directed specifically
to any Product and/ or Backup Candidates; and
(iii) [***]
6.5 3BP Demand of Products.
(a) With respect to 3BP’s requirements for any Product for use in Development activities
undertaken by 3BP in accordance with the Global Development Plan, conduct of Retained Territory Additional
Studies sponsored by 3BP and/ or Commercialization of Products in the Retained Territory, 3BP shall have the right:
[***]. For the avoidance of doubt, 3BP may exercise one of these rights or several of these rights, each of those once
or severally. With respect to the same Product (including any component thereof), the rights of 3BP set forth under
(i) and (ii) above shall, at a given time, be exercised alternatively and not cumulatively.
***Confidential Treatment Requested.
24
(b) 3BP may request that Clovis supply Products (or any component thereof) that, at the time of
3BP’s request, Clovis is Manufacturing itself, or through an Affiliate or Contract Manufacturer. Any such Product
(or any component thereof) will be supplied to 3BP for use by 3BP in Development activities undertaken by 3BP in
accordance with the Global Development Plan, conduct of Retained Territory Additional Studies sponsored by 3BP,
and/ or Commercialization of Products in the Retained Territory at the applicable Transfer Price [***] and pursuant
to the terms of one or more, as applicable, supply agreements to be subsequently entered into by the Parties with
respect to the Product or component to be supplied (each a “Supply Agreement”). As part of such Supply
Agreement the Parties may agree that Clovis or its Contract Manufacturer shall produce material that meets any
particular cGMPs required by 3BP, in which event Clovis or its Contract Manufacturer shall Manufacture and supply
Products (or Product components, as the case may be) pursuant to such particular, agreed-upon cGMP for Products
manufactured for 3BP. Clovis agrees that each Supply Agreement will in any event include a right for 3BP to audit
or have a designee audit, at least once per Calendar Year, any records and other documentation of Clovis in order to
verify the Transfer Price invoiced by Clovis. In connection with each Supply Agreement, the Parties will enter into a
separate quality agreement setting forth the responsibilities of the quality organizations of each Party with respect to
the manufacture of the Product in accordance with the applicable cGMPs (the “Quality Agreement”). Except
pursuant to a Supply Agreement concluded by the Parties pursuant to this Section 6.5(b), Clovis will have no
obligation to supply any Products to 3BP.
(c) At any time, 3BP shall have the right to conclude separate supply agreements with Contract
Manufacturers then supplying Product to Clovis or its Affiliates, provided that the Manufacture by such Contract
Manufacturers is restricted to supply of Products for use by 3BP in Development activities undertaken by 3BP in
accordance with the Global Development Plan, conduct of Retained Territory Additional Studies sponsored by 3BP,
and/ or Commercialization of Products in the Retained Territory.
(d) At the reasonable request of 3BP which can be made once or severally, and at 3BP’s cost and
expense, Clovis will (and make Diligent Efforts to cause its Contract Manufacturers to) promptly disclose (and
provide copies, as applicable) to 3BP and/ or Contract Manufacturers of 3BP, all Clovis Know-How, including
Manufacturing Data, and provide copies of Manufacturing Documentation existing by then, all as necessary or useful
to enable 3BP, or such Contract Manufacturers as 3BP may engage, to Manufacture 3BP’s requirements for Products
for Development activities undertaken by 3BP in accordance with the Global Development Plan, conduct of Retained
Territory Additional Studies sponsored by 3BP, and/ or Commercialization of Products in the Retained Territory. In
addition, Clovis will (and make Diligent Efforts to cause its Contract Manufacturers to) make available to 3BP and/
or Contract Manufacturers selected by 3BP, on a reasonable consultation basis, advice of its technical personnel, at
3BP’s expense, as may reasonably be requested by 3BP in connection with such transfer of Clovis Know-How,
including that 3BP will reimburse Clovis for reasonable travel expenses incurred by personnel of Clovis and/ or
Contract Manufacturers of Clovis while rendering services at the request of 3BP under this Section 6.5(d);
(e) 3BP will have the right to grant sublicenses under the rights set forth in Section 7.2 to its
Affiliates and/ or Contract Manufacturers, provided that, with respect to any Contract Manufacturers, 3BP is under
the same obligations as Clovis pursuant to Section 6.4(c).
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7. LICENSES AND RELATED RIGHTS
7.1 License to Clovis.
(a) License Grants. Subject to the terms and conditions of this Agreement, 3BP hereby grants to
Clovis and its Affiliates, and Clovis hereby accepts:
(i) an exclusive (even as to 3BP, except as provided in Section 7.1(b)(v)), royalty-free
license, with the right to sublicense as provided in Section 7.1(c), under the 3BP Technology to Develop and have
Developed the Products in the Licensed Territory during the Term;
(ii) an exclusive (even as to 3BP, except as provided in Section 7.1(b)(iii)), royalty-free
license under the 3BP Technology, with the right to sublicense as provided in Section 7.1(c), to Manufacture and
have Manufactured the Products in the Licensed Territory during the Term;
(iii) an exclusive (even as to 3BP), royalty-bearing license, with the right to sublicense as
provided in Section 7.1(c), under the 3BP Technology to use, sell, offer for sale, distribute, import, export and
otherwise Commercialize the Products in the Licensed Territory during the Term; and
(iv) a non-exclusive, royalty-free license, with the right to sublicense as provided in
Section 7.1(c), under the 3BP Technology to Develop and have Developed and Manufacture and have Manufactured
the Products in the Retained Territory during the Term.
(b) 3BP Retained Rights. It is understood that at all times 3BP and its Affiliates retain: (i) the
exclusive right to Commercialize, either itself or through Third Parties, however, subject to Section 7.3(a), the
Products in the Retained Territory; (ii) the right to practice the 3BP Technology as and to the extent needed in
connection with its activities under this Agreement in fulfillment of its obligations hereunder or exercise of its rights
hereunder; (iii) the right to Manufacture and have Manufactured the Products (including in the Licensed Territory);
(iv) the right to Develop and have Developed the Products in the Retained Territory; (v) the right to Develop and
have Developed the Products in the Licensed Territory in accordance with the Global Development Plan; and (vi) the
right to practice the 3BP Technology for the development, manufacture, commercialization of products other than the
Product, [***].
(c) Sublicense Rights. Subject to Section 7.3(b), Clovis will have the right to grant sublicenses
(through one or more tiers) of the licenses granted to it under Section 7.1(a) to any Third Parties (each a
“Sublicense”) without 3BP’s prior written consent; provided that Clovis hereby covenants that:
(i) any such Sublicense must refer to this Agreement and will be subordinate to and
consistent with the terms and conditions of this Agreement, and will and shall not limit: (A) the ability of Clovis
(individually or through the activities of its Sublicensees) to fully perform all its obligations under this Agreement; or
(B) 3BP’s rights under this Agreement or the exercise of such rights, including the rights granted to 3BP pursuant to
Section 11.7(b);
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26
cause;
(ii) any such Sublicense must include a right of Clovis to terminate the Sublicense for
(iii) any Sublicenses granted by Clovis to others under this Section to sell Therapeutic
Products that are subject to royalty payments under this Agreement must include an obligation for the Sublicensee to
account for and report its sales of Therapeutic Products to Clovis on the same basis as if such sales were Net Sales by
Clovis, and any Sublicenses granted by Clovis to others under this Section to sell Imaging Agents that are subject to
royalty payments from such Sublicensee to Clovis must not include [***] and must include an obligation for the
Sublicensee to account for and report to Clovis its sales of Imaging Agents on which such royalties are based in order
to be able to verify the proper inclusion of such amounts as Sublicense Revenue;
direct Sublicense agreement with Clovis or its Affiliates), the following shall apply: [***].
(iv) if Clovis intends to grant a Sublicense in the first tier (that is, to a Sublicensee under
the right to grant further sublicenses the obligation of such Sublicensee to [***]; and
(v) Clovis shall include into any Sublicense agreement in the first tier that also includes
copy of each such Sublicense agreement, promptly after execution thereof.
(vi) if Clovis grants a Sublicense to any Third Party, then Clovis will provide 3BP with a
7.2 License to 3BP. Subject to the terms and conditions of this Agreement, Clovis hereby grants to 3BP
a worldwide, fully paid-up, royalty-free, non-exclusive license, with the right to sublicense through multiple tiers,
under the Clovis Technology to use and exploit the Clovis Technology to: (a) Develop, Manufacture, and
Commercialize the Products in the Retained Territory; (b) Develop the Products in the Licensed Territory in
accordance with the Global Development Plan; (c) Manufacture Products in the Licensed Territory; and (d) exercise
the rights retained by 3BP pursuant to Section 7.1(b) and the rights granted to 3BP pursuant to Section 11.7.
7.3 Right of First Negotiation.
(a) [***]
(b) [***]
7.4 Negative Covenant. Each Party agrees that during the Term it will not, [***].
7.5 No Implied Licenses. Except as explicitly set forth in this Agreement, neither Party will be deemed
by estoppel or implication to have granted the other Party any license or other right to any Intellectual Property Right
of such Party. Neither Party will engage in any activities that use the other Party’s technology in a manner that is
outside the scope of the rights granted under this Agreement.
8. FINANCIAL TERMS.
8.1 Upfront Payment. Within thirty (30) days after the Effective Date (and subject to the submission
(email sufficient) of an invoice within three (3) Business Days of the Effective Date), Clovis will pay to 3BP for the
licenses to Clovis and related rights as set forth in Section 7.1 [***] a one-time, non-refundable and non-creditable
upfront cash payment equal to: (a) Four Million Five Hundred Thousand Euros (€4,500,000); and (b) Four Million
Five Hundred Thousand Dollars ($4,500,000).
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8.2 Collaboration FTE Support.
(a) During the Pre-Clinical Program Term, as support for work performed by 3BP under the
Global Development Plan and the Manufacturing Plan, Clovis will pay 3BP for up to [***] ([***]) FTEs at the
proportionate share of the FTE Rate for each FTE related to the time devoted by such FTE to the Collaboration. The
Parties anticipate that 3BP will devote on average (calculated on a calendar quarterly basis) up to [***] ([***]) FTEs
to Pre-Clinical Development (other than CMC Activities) and up to [***] ([***]) FTEs to CMC Activities in Pre-
Clinical Development during the Pre-Clinical Program Term. Any FTE support to be provided by Clovis for further
Pre-Clinical Development work after the Pre-Clinical Program Term is subject to the mutual written agreement of
the Parties. 3BP will establish a time tracking system for its FTEs involved in the Collaboration, under which each
person for whom 3BP seeks reimbursement from Clovis will specify on an every-other-week basis what percentage
of his or her working time is spent on the Collaboration.
(b) Within [***] ([***]) Business Days following the end of each calendar quarter during the Pre-
Clinical Program Term and, subject to Section 8.2(a) above, thereafter, 3BP will invoice Clovis for the FTEs time at
the FTE Rate devoted during such quarter to the Collaboration and will provide with each such invoice a reasonably
detailed description of the proportionate share of his or her time devoted by each FTE. Clovis will pay all undisputed
FTE charges to 3BP within [***] ([***]) days of receiving such invoice. Section 8.11 will apply to 3BP and the
FTE charges will be subject to audit by Clovis under the terms of that Section 8.11.
8.3 Development Costs Reimbursement.
(a) With respect to the costs incurred by 3BP for Third Party subcontractors engaged by 3BP to
perform Pre-Clinical Development activities which are to be reimbursed by Clovis pursuant to Section 3.2(b), during
each calendar quarter of the Pre-Clinical Development Term, 3BP will invoice Clovis for such amounts of costs of
Third Party subcontractors which have been incurred by 3BP in such calendar quarter within [***] ([***]) days
following the end of each calendar quarter, and Clovis will pay each such invoice within [***] ([***]) days after
receipt thereof. Each such invoice will be accompanied by appropriate documentation (e.g., the Third Party
subcontractor’s invoice) to support the invoiced amount to be reimbursed.
(b) With respect to Development Costs associated with Retained Territory-Specific Study
Elements that Clovis agrees to incorporate in a clinical study for a Product and for which 3BP has agreed to be
responsible pursuant to Section 3.3(b), Clovis will invoice 3BP for such amounts within [***] ([***]) days
following the end of each calendar quarter, and 3BP will pay each such invoice within [***] ([***]) days after
receipt thereof. Each such invoice will be accompanied by appropriate documentation to support the invoiced amount
to be reimbursed.
8.4 Annual Technology Access Fee. Commencing on December 15, 2019 Clovis will pay to 3BP each
Calendar Year, a non-refundable and non-creditable technology access fee, consisting of Dollar amounts and Euro
amounts, equal to the amounts set forth in the following schedule:
Calendar Year
2019
2020
2021
2022
Dollars
$[***]
$[***]
$[***]
$[***]
Euros
€[***]
€[***]
€[***]
€[***]
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Calendar Year
2023
2024
2025, and subsequent Calendar
Years
Dollars
$[***]
$[***]
$[***]
Euros
€[***]
€[***]
€[***]
After the initial technology access fee due on December 15, 2019, the technology access fee for each
subsequent Calendar Year will be due on the anniversary of such date.
Following [***], the technology access fee owed on December 15 for each Calendar Year thereafter will be
an amount equal to (a) [***] and (b) [***] unless and until such Therapeutic Product achieves Net Sales equal to
[***] ($[***]), at which time an annual technology access fee will no longer be due.
At least forty-five (45) days prior to December 15 of each Calendar Year in which the technology access fee
is owed, 3BP will issue an invoice to Clovis specifying the corresponding amount due based on the schedule above,
and Clovis will make such payment no later than December 15 of that Calendar Year.
8.5 Development Milestone Payments. Clovis will make milestone payments (each, a “Milestone
Payment”) to 3BP following the occurrence of each of the milestone events (each, a “Milestone Event”) as set forth
below in this Section 8.5. Each of the Milestone Payments will be payable by Clovis to 3BP within [***] ([***])
Business Days of the achievement of the specified Milestone Event, and such payments when owed or paid will be
non-refundable and non-creditable and not subject to set-off. Each of the Milestone Payments are payable only once,
regardless of the number of Therapeutic Products that achieve a specified Milestone Event. Clovis shall notify 3BP
in writing promptly upon occurrence of a Milestone Event.
Therapeutic Product Milestone Event
Milestone Payment (consisting of
Dollar amounts and Euro amounts)
Dollars
Euros
$[***]
$[***]
$[***]
$[***]
$[***]
$[***]
$[***]
$[***]
€[***]
€[***]
€[***]
€[***]
€[***]
€[***]
€[***]
€[***]
[***]]
[***]
[***]
[***]
[***]
[***]
[***]
[***]
1 [***]
2 [***]
3 [***]
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If during the Pre-Clinical Program Term, 3BP is for reasons within 3BP’s control delayed in completing the
Pre-Clinical Development work for which it is responsible, such that the corresponding estimated timeline for such
work set forth in the Global Development Plan is delayed by more than [***] ([***]) months, then the dates
associated with the Milestone Events stated in the first three rows of the table above will each be extended by a
period of time equal to the actual number of months of the delay.
In the event that a Milestone Event occurs (the “Occurred Milestone Event”) and a Milestone Payment is
due but at that time one or more Milestone Events preceding the Occurred Milestone Event according to the order set
forth in the table above, have not occurred, then [***].
[***].
[***].
For the avoidance of doubt, the payments set forth above shall be due regardless of whether (i) in relation to
the conduct of a clinical study, the Therapeutic Product is supplied for conduct of such study in ready-to-use form or
as a kit or (ii) in relation to Regulatory Approval, the Therapeutic Product receives Regulatory Approval in ready-to-
use form or as a kit.
8.6 Sublicense Revenue. Clovis will pay to 3BP an amount equal to [***] percent ([***]%) of all
Sublicense Revenue that Clovis or any of its Affiliates receives during each Calendar Year in connection with a
Sublicense agreement with any Sublicensee concerning a Product for all or part of the Licensed Territory. Any such
payments to 3BP will be due within [***] ([***]) days following the end of each calendar quarter in accordance with
the terms of Section 8.7(d) hereof.
8.7 Royalty Payments.
(a) Royalties in Licensed Territory for Therapeutic Products. Subject to Section 8.7(c),
Clovis will pay to 3BP royalties on Net Sales of Therapeutic Products in the Licensed Territory during each calendar
quarter during the Royalty Term, as calculated by multiplying the total Net Sales of the Therapeutic Products during
such calendar quarter by the applicable royalty rate as determined in the following table. For purposes of determining
the applicable royalty rate, all Net Sales of the Therapeutic Products in the Licensed Territory will be aggregated
(including, for avoidance of doubt, sales by Affiliates of Clovis and Sublicensees). For the avoidance of doubt, the
royalties shall be due regardless of whether the Therapeutic Product is sold by Clovis, its Affiliates or Sublicensees
in ready-to-use form or as a kit.
Annual Net Sales of Therapeutic Product
[***]
[***]
[***]
[***]
[***]
[***]
Royalty Rate
[***]%
[***]%
[***]%
[***]%
[***]%
[***]%
(b) Royalties in Licensed Territory for Imaging Agents. If Clovis or any of its Affiliates is the
Selling Party with respect to the sale of an Imaging Agent in the Licensed Territory, Clovis will pay to 3BP royalties
at a rate of [***] ([***]%)] on Clovis’ or its Affiliate’s Net Sales of all Imaging Agents in the Licensed Territory
during each calendar quarter during the Royalty Term, as calculated by multiplying the total Net Sales by Clovis or
its Affiliate of the Imaging Agents during such calendar quarter by the royalty rate of [***]%. For the avoidance of
doubt, royalties shall be due regardless of whether an Imaging Agent is sold by Clovis as a stand-
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30
alone product or as an enabling tool for a Therapeutic Product. If an Imaging Agent is sold by Clovis or its Affiliate
together with a Therapeutic Product (for the avoidance of doubt, other than as a Combination Product), then the
royalty rates set forth in Section 8.7(a) above shall apply to the aggregate sales price of the sale of the Therapeutic
Product and the Imaging Agent. For the avoidance of doubt, the royalties shall be due regardless of whether the
Imaging Agent is sold by the Selling Party in ready-to-use form or as a kit.
(c) Royalty Adjustments.
(i) Third Party License. On a country-by-country and Product-by-Product basis and
only in the event that the Therapeutic Product Commercialized by Clovis, its Affiliates or Sublicensees comprises a
FAP-Targeting Compound that is a peptide, if, after the Effective Date, Clovis or its Affiliate or Sublicensee:
(A) reasonably determines that it is Necessary to obtain a license from any Third Party under Patents controlled by
such Third Party in order to make, have made, use, sell, offer for sale or import a Therapeutic Product in any country
of the Licensed Territory, and pursuant to such license is required to pay a royalty to the Third Party and such
Necessity is approved by 3BP and the Parties through the JSC agree that Clovis, its Affiliate or Sublicensee shall
obtain the license (and not 3BP, in which event this Section 8.7(c)(i) shall not be applicable) and Clovis has provided
to 3BP the respective license terms (including royalties and other payments) to be entered into with the Third Party
and these are approved by 3BP; or (B) is held by any court of competent jurisdiction in a final, non-appealable
decision, due to infringement of Patents controlled by such Third Party through making, having made, using, selling,
offering for sale or importing a Therapeutic Product in any country(ies) of the Licensed Territory, to pay a royalty to
such Third Party, then Clovis may deduct from the royalties that would otherwise be due to 3BP for such country
[***] percent ([***]%) of any such amount paid by Clovis (or its Affiliates, Sublicensees) to such Third Party in the
respective calendar quarter; provided that the deduction pursuant to this Section 8.7(c)(i) will not reduce the royalties
due to 3BP for the Therapeutic Product in such country in the respective calendar quarter below [***] percent
([***]%) of the amount for such calendar quarter that otherwise would have become due for such country pro rata in
such calendar quarter pursuant to Section 8.7(a).
(ii) Patent Expiry, Absence of Data Exclusivity. On a country-by-country basis and
Product-by-Product basis, if there is no Valid Claim of any 3BP Patent Covering the composition of matter of the
Therapeutic Product or Data Exclusivity relating to the Therapeutic Product, then the royalty rates under
Section 8.7(a) will be reduced by [***] percent ([***]%).
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(iii) Generic Product. On a country-by-country and Product-by-Product basis, if, during
any calendar quarter, the unit volume of sales of all Generic Product(s) in such country during such quarter are more
than [***] percent ([***]%) of the total unit volume of sales of (i) all such Generic Product(s) plus (ii) the respective
Therapeutic Product’s unit volume of sales in such country, then the royalty rates under Section 8.7(a) (as adjusted
pursuant to Section 8.7(c)(ii) if applicable) will be reduced by [***] percent ([***]%). The percentage of sales of
the Generic Product relative to all sales of unlicensed products and to the sales of Therapeutic Product will be based
on unit-equivalent data, calculated using data provided by IMS or, in the absence of such publication by IMS, any
similar market data source, or if such data is not available, another reliable data source that is mutually acceptable to
3BP and Clovis.
(d) Royalty Reports and Payments. Within [***] ([***]) days following the end of each
calendar quarter during the Royalty Term, Clovis will provide 3BP with a report containing the following
information for the applicable calendar quarter basis broken down on a country-by-country and Product-by-Product
basis: (i) gross sales and Net Sales of the Product consolidated in Dollars; (ii) a calculation (including the basis of
such calculations) of the royalty payment due on such sales; (iii) if applicable, the amount of Sublicense Revenue
received during the quarter and the amounts owed under Section 8.6; (iv) the adjustment, if any, made in accordance
with the terms of Section 8.7(c), as well as any other details reasonably requested by 3BP. Within [***] ([***]) days
of providing the report to 3BP, Clovis will proceed to the payment of the royalties and Sublicense Revenue payment
due by wire transfer of immediately available funds.
8.8 Payment Method. All payments due under this Agreement to 3BP will be made in the specified
currency by bank wire transfer in immediately available funds to an account designated by 3BP.
8.9 Late Payment. If a Party fails to make any payment due to the other Party under this Agreement,
then interest will accrue on a daily basis at the rate equal to one month EURIBOR plus [***] ([***]) basis points per
annum, or at the maximum rate permitted by Applicable Law, whichever is the lower, provided that the interest shall
in no event be less than [***]% per annum.
8.10 Foreign Exchange. Conversion of sales recorded in local currencies to Dollars will be performed
in a manner consistent with Clovis’ normal practices used to prepare its audited financial statements for internal and
external reporting purposes, which uses a widely accepted source of published exchange rates.
8.11 Records; Inspection. During the Royalty Term, Clovis will, and will ensure that its Affiliates
and Sublicensee(s) will, keep complete, true and accurate books of account and records for the purpose of
determining the payments to be made under this Agreement. Such books and records will be kept for at least [***]
([***]) years following the end of the Calendar Year to which they pertain. Such records will be open for inspection
during such [***] period by independent accountants reasonably acceptable to Clovis (who will agree with Clovis to
keep such records confidential), solely for the purpose of verifying payment statements hereunder. Such inspections
will be made no more than once each Calendar Year (except for-cause), on reasonable notice during normal business
hours, and will solely relate to the [***] ([***]) preceding Calendar Years. Any underpayment or overpayment (plus
interest as set forth in Section 8.9) that are discovered will be paid by the owing Party within [***] ([***]) days.
Inspections conducted under this Section 8.11 will be
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at the expense of 3BP, unless the inspection discloses an underpayment by Clovis of [***] ([***]%) or more of the
amount due for any period covered by the inspection, whereupon the reasonable fees of the independent accountant
relating to the inspection for such period will be paid promptly by Clovis.
8.12 Taxes.
(a) VAT. Any amounts for payment set forth in Sections 8.1 to 8.7 above are expressed net of
VAT, which shall be paid by Clovis in addition, to the extent applicable.
(b) Taxes on Income. Subject to Section 8.12(a), each Party will be solely responsible for the
payment of all taxes imposed on its share of income arising directly or indirectly from the efforts of the Parties under
this Agreement.
(c) Withholding Taxes. All payments due and payable under this Agreement will be made
without any deduction or withholding for or on account of any tax unless such deduction or withholding is required
by Applicable Laws. If the paying Party is so required to deduct or withhold, such Party will (i) promptly notify the
other Party of such requirement, (ii) pay to the relevant authorities the full amount required to be deducted or
withheld promptly upon the earlier of determining that such deduction or withholding is required or receiving notice
that such amount has been assessed against the other Party, (iii) promptly forward to the other Party an official
receipt (or certified copy) or other documentation reasonably acceptable to the other Party evidencing such payment
to such authorities and (iv) assist the other Party in obtaining any redemption of such amount.
(d) Other Taxes. Each Party will be solely responsible for the payment of custom duties,
registration duties, transfer taxes, stamp duties and any other taxes or duties imposed to it in relation with the
payments made under this Agreement.
9. INTELLECTUAL PROPERTY
9.1 Patent Strategy. With respect to all Patent preparation, filing, prosecution and maintenance, defense,
and enforcement activities described in this Article 9, the Parties will discuss, confer and cooperate in good faith
with respect to the overall Patent strategy with respect to the Licensed Territory and Retained Territory. Each Party,
acting reasonably and in good faith, will consider the comments of the other Party in connection with the Patent
strategy.
9.2 Ownership of Inventions; Right to File Patent Applications.
(a) Ownership of Inventions. Each Party will own all inventions, Know-How and other
Intellectual Property Rights, whether or not patentable, made solely by its or its Affiliates’ own employees, agents,
independent contractors or subcontractors (including Contract Manufacturers, if in accordance with the terms of the
applicable agreement with such Contract Manufacturer entered into pursuant to Section 6.4), in the course of
conducting its activities under this Agreement (“Sole Inventions”). The Parties will jointly own, in equal, undivided
interests, any inventions, Know-How and other Intellectual Property Rights, whether or not patentable, that are made
jointly by employees, agents, independent contractors or subcontractors (including Contract Manufacturers, if in
accordance with the terms of the applicable agreement with such Contract Manufacturer entered into pursuant to
Section 6.4) of each Party or its Affiliates in the course of conducting its activities under this Agreement
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(including pursuant to the Global Development Plan or the Manufacturing Plan) (“Joint Inventions”). Inventorship
will be determined in accordance with the U.S. patent laws.
(b) Right to Prepare and File Priority and PCT Patent Applications. As between the Parties,
(i) [***] and (ii) [***]. With respect to any Patents claiming any Joint Inventions which relate to any FAP-Targeting
Compound (each, a “Joint Patent”), (a) the Parties’ patent counsels will confer in good faith to attempt to agree
upon the appropriate Party to prepare the Joint Patent, and (b) if the Parties are unable to agree, then (i) [***], and
(ii) [***]. All Joint Patents will be subject to each Party’s rights set forth in Sections 9.2 and 9.4 to 9.6 below. In
each instance above, the Party preparing an application for any Patent will file the priority application in the
jurisdiction of its choice and use outside patent counsel of that Party’s choice that is reasonably acceptable to the
other Party.
9.3 Invention Disclosure. Each Party will promptly disclose to the other Party all Sole Inventions and
Joint Inventions, including any invention disclosures or other similar documents, submitted to it by its or its
Affiliates’ employees, agents, independent contractors or subcontractors (including Contract Manufacturers in
accordance with the terms of the applicable agreement with such contract manufacturer entered into pursuant to
Section 6.4), describing inventions that are either Sole Inventions or Joint Inventions, and all information relating to
such inventions to the extent necessary for the preparation, filing and prosecution of any Patent with respect to such
invention. Upon the disclosure of a Joint Invention or Sole Invention pursuant to this Section 9.3, the Parties will
promptly discuss such Joint Invention or Sole Invention and confirm its status as either a Joint Invention or a Sole
Invention in light of the ownership principles set forth in Section 9.2.
9.4 Patent National and Regional Filings; Prosecution, Maintenance, and Abandonment.
(a) Clovis Authority.
(i) Prosecution and Maintenance. Concurrent with or subsequent to the filing of a PCT
Application, Clovis shall, at its own cost and expense, be responsible for the filing of any regional (including with
the European Patent Office) or national application (other than a priority application) and for prosecution and
maintenance of (A) all Clovis Patents in any jurisdiction world-wide, and (B) [***] and Joint Patents in the Licensed
Territory, in Clovis’ own name, with respect to Clovis Patents, in 3BP’s name, with respect to the [***], and in the
name of both Parties, with respect to Joint Patents, including the defense of any claims or conducting any
proceedings relating to such Patents (including but not limited to any patent interference, derivation proceeding,
reissue, re-examination, supplemental examination, post-grant review, inter partes review, or other Patent Challenge
proceedings, subject in each case to the provisions of Section 9.5). Clovis shall promptly provide 3BP and 3BP’s
external patent counsel, (i) with respect to Clovis Patents, with all material documentation and correspondence from,
sent to or filed with patent offices in the respective jurisdictions regarding the prosecution of any such Patents, and
provide 3BP with a reasonable opportunity to review and comment upon all substantive filings with such patent
offices in advance of submission of such filings to such patent offices and (ii) with respect to [***] and Joint Patents,
with all documentation and correspondence from, sent to or filed with patent offices in the respective jurisdictions
regarding the prosecution of any such Patents, and provide 3BP with a reasonable opportunity of a least [***] (or in
exceptional urgent cases a lesser but reasonable period) to review and comment upon all filings with such patent
offices in advance of submission of such filings to such patent offices. Clovis shall consider 3BP’s comments, acting
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reasonably and in good faith, including any comments regarding whether to reduce the scope of or abandon any
Valid Claims within such Patents taking into account the joint patent strategy established by the Parties pursuant to
Section 9.1.
(ii) Abandonment. If Clovis determines to abandon or not to further prosecute (e.g., not
file any further divisional or continuation applications) or not to maintain (e.g., not to validate a national/ regional
patent in a particular country) or otherwise abandon (e.g., by not paying respective annual maintenance or other fees
due) (collectively to “Abandon”) any Patent for which it has prosecution and maintenance authority under
Section 9.4(a)(i) in any country, then Clovis shall notify 3BP in writing of such determination at least [***] ([***])
days prior to the intended Abandonment, and (A) in the event a Joint Patent shall be Abandoned, Section 9.4(a)(iii)
shall apply, (B) in the event a Clovis Patent shall be Abandoned, Section 9.4(a)(iv) shall apply, and (C) in the event
a [***] shall be Abandoned, Section 9.4(a)(v) shall apply. In the event that the Patent to be Abandoned expires
pursuant to statutory time periods (e.g., non-payment of fees after due date) (the “Statutory Expiration Date”), the
aforementioned [***] ([***]) days’ notice period shall be calculated such that all of [***] ([***]) days are prior to the
Statutory Expiration Date.
(iii) Abandonment of Joint Patents. In the event Clovis notifies 3BP of its determination
to Abandon a Joint Patent, it shall provide 3BP with the opportunity to request to further prosecute and maintain such
Patent in such country in 3BP’s own name (or the name of an Affiliate or licensee of 3BP) as assignee, at 3BP’s own
cost and expense, which request shall be made within [***] ([***]) days of receipt of Clovis notification. In the event
that 3BP has, within the aforementioned [***] ([***]) days notified Clovis that it wishes to assume such Patent,
Clovis shall promptly assign and transfer its joint interest in such Joint Patent to 3BP (or the designated Affiliate or
licensee of 3BP) and shall execute any documents and undertake any other acts, reasonably necessary to vest all such
rights in such Patent to 3BP and the Patent shall from such assignment be deemed to be a “3BP Patent” with all other
rights and obligations of Clovis pursuant to this Agreement in relation to such 3BP Patent (including payment
obligations and licenses granted to Clovis pursuant to Section 7.1) remaining unaffected. In the event that 3BP has
not requested the assumption of the Joint Patent within the aforementioned [***] ([***]) day period, Clovis shall be
free to Abandon the Patent.
(iv) Abandonment of Clovis Patents. In the event Clovis notifies 3BP of its
determination to Abandon a Clovis Patent, it shall provide 3BP with the opportunity to request to further prosecute
and maintain such Patent in such country at 3BP’s own cost and expense, but, for the avoidance of doubt, with all
other rights and obligations of Clovis and 3BP pursuant to this Agreement in relation to such Clovis Patent remaining
unaffected, including the license pursuant to Section 7.2. In the event that 3BP has not notified Clovis that it wishes
to assume the further prosecution and maintenance of the Clovis Patent within the [***] ([***]) days, Clovis shall be
free to Abandon the Patent.
(v) Abandonment of [***]. In the event Clovis notifies 3BP of its determination to
Abandon a [***], it shall provide 3BP with the opportunity to request to further prosecute and maintain such Patent
in such country at 3BP’s own cost and expense. The request shall be made within [***] ([***]) days of receipt of
Clovis notification and together with and from such request, 3BP shall have the right to continue prosecution of the
[***] under 3BP’s authority, in accordance with and as forth in Section 9.4(b) and Section 9.5(b), with all other
rights and obligations of Clovis pursuant to this Agreement in relation to such [***] (including payment obligations
and licensed granted to Clovis pursuant to Section 7.1) remaining unaffected. In the event that 3BP has not notified
Clovis that it wishes to assume
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the further prosecution and maintenance of the Patent within the aforementioned [***] ([***]) day period, Clovis
shall be free to Abandon the Patent.
(b) 3BP Authority.
(i) Prosecution and Maintenance. Concurrent with or subsequent to the filing of a PCT
Application, 3BP shall, at its own cost and expense, be responsible for the filing of any regional (including with the
European Patent Office) or national Patent application (other than a priority application) and for the prosecution and
maintenance of (A) all 3BP Patents (other than a [***] in the Licensed Territory) in any jurisdiction world-wide and
(B) all Joint Patents in the Retained Territory, in its own name with respect to the 3BP Patents, and in the name of
both Parties with respect to any Joint Patents, including the defense of any claims or conducting any proceedings
relating to such Patents (including but not limited to any patent interference, derivation proceeding, reissue, re-
examination, supplemental examination, post-grant review, inter partes review, or other Patent Challenge
proceedings, subject in each case to the provisions of Section 9.5). 3BP shall promptly provide Clovis (i) with
respect to 3BP Patents, with all material documentation and correspondence from, sent to or filed with patent offices
in the respective jurisdictions regarding the prosecution of any such Patents, and provide Clovis with a reasonable
opportunity to review and comment upon all substantive filings with such patent offices in advance of submission of
such filings to such patent offices and (ii) with respect to Joint Patents, with all documentation and correspondence
from, sent to or filed with patent offices in the respective jurisdictions regarding the prosecution of any such Patents,
and provide Clovis with a reasonable opportunity of a least [***] (or in exceptional urgent cases a lesser but
reasonable period) to review and comment upon all filings with such patent offices in advance of submission of such
filings to such patent offices. 3BP shall consider Clovis’ comments, acting reasonably and in good faith, including
any comments regarding whether to reduce the scope of or abandon any Valid Claims within such Patents taking into
account the joint patent strategy established by the Parties pursuant to Section 9.1.
(ii) Abandonment. If 3BP determines to Abandon any Patent for which it has prosecution
and maintenance authority under Section 9.4(b)(i) in any country, then 3BP shall notify Clovis in writing of such
determination at least [***] ([***]) days prior to the intended Abandonment, and (A) in the event a Joint Patent shall
be Abandoned, Section 9.4(b)(iii) shall apply and (B) in the event a 3BP Patent shall be Abandoned, Section 9.4(b)
(iv) shall apply. In the event that the Patent to be Abandoned expires pursuant to a Statutory Expiration Date, the
aforementioned [***] ([***]) days’ notice period shall be calculated such that all of these [***] ([***]) days are prior
to the Statutory Expiration Date.
(iii) Abandonment of Joint Patents. In the event 3BP notifies Clovis of its determination
to Abandon a Joint Patent, it shall provide Clovis with the opportunity to request to further prosecute and maintain
such Patent in such country in Clovis’ own name (or the name of an Affiliate or Sublicensee) as assignee, at Clovis’
own cost and expense, which request shall be made within [***] ([***]) days of receipt of 3BP notification. In the
event Clovis has, within the aforementioned [***] ([***]) days, notified 3BP that it wishes to assume the Patent, 3BP
shall promptly assign and transfer its joint interest in such Joint Patent to Clovis (or the designated Affiliate or
Sublicensee) and shall execute any documents and undertake any other acts, reasonably necessary to vest all such
rights in such Patent to Clovis (or its designee) and such Patent shall from such assignment be deemed to be a
“Clovis Patent” with all provisions under this Agreement applying to it, including the license pursuant to Section 7.2.
In the event that Clovis has not requested the assumption of the Joint Patent within the aforementioned [***] ([***])
day period, 3BP shall be free to Abandon the Patent.
to Abandon a 3BP Patent, it shall provide Clovis with the opportunity to request to further prosecute
(iv) Abandonment of 3BP Patents. In the event 3BP notifies Clovis of its determination
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and maintain such Patent in such country at Clovis’ own cost and expense, but, for the avoidance of doubt, with all
other rights and obligations of Clovis and 3BP pursuant to this Agreement in relation to such 3BP Patent remaining
unaffected, including the license pursuant to Section 7.1. In the event that Clovis has not notified 3BP that it wishes
to assume the further prosecution and maintenance of the 3BP Patent within the [***] ([***]) days, 3BP shall be free
to Abandon the Patent.
(c) Patent Term Extension. 3BP and Clovis will cooperate with each other and will use Diligent
Efforts in obtaining patent term extensions, orange book listings (or equivalent), or supplemental protection
certificates or their equivalents in any country to the Clovis Patents, the 3BP Patents, and the Joint Patents.
(d) Cooperation. Each Party will provide the other Party all reasonable assistance and
cooperation in the patent prosecution efforts provided above in this Section 9.4, including providing any necessary
information, documents, and powers of attorney, and executing any other required documents or instruments for such
prosecution.
9.5 Defense of Patent Challenges.
(a) Clovis Authority. If a Clovis Patent becomes the subject of any Patent Challenge proceeding
commenced by a Third Party in any jurisdiction world-wide, or if a [***] or Joint Patent becomes the subject of any
Patent Challenge proceeding commenced by a Third Party in any country in the Licensed Territory, then Clovis will
have the first right, but not the obligation, to control the defense of such Patent Challenge at its own expense using
counsel of its own choice. Clovis will notify 3BP reasonably in advance of all applicable deadlines whether or not
Clovis will defend against such Patent Challenge. If Clovis decides that it does not wish to defend against such
Patent Challenge, 3BP will thereafter have the right, but not the obligation, to assume defense of such action at its
own expense. If Clovis decides that it wishes to defend against such Patent Challenge, 3BP shall have the right, but
not the obligation, to participate in such defense. If 3BP elects to participate in the defense against an action, 3BP
will notify Clovis within [***] ([***]) Business Days, and (i) with respect to Patent Opposition, the Parties will
jointly control the defense using counsel acceptable to each Party and sharing expenses equally and neither Party will
have the right to settle any proceeding without the prior written consent of such other Party, such consent not to be
unreasonably withheld or delayed and (ii) with respect to any Patent Challenge proceeding other than a Patent
Opposition, Clovis will permit 3BP to participate in the proceedings to the extent permissible under Applicable Laws
and to be represented by its own counsel at 3BP’s expense and Clovis will reasonably consider comments of 3BP
with respect to any defense strategy, but will have sole and final decision-making authority with respect to such
defense strategy, including settlement of any such proceeding.
(b) 3BP Authority. If a 3BP Patent other than a [***] in the Licensed Territory becomes the
subject of any Patent Challenge proceeding commenced by a Third Party in any jurisdiction world-wide, or if a [***]
or a Joint Patent becomes the subject of any Patent Challenge proceeding commenced by a Third Party in any
country in the Retained Territory, then 3BP will have the first right, but not the obligation, to control the defense of
such Patent
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Challenge at its own expense using counsel of its own choice. 3BP will notify Clovis reasonably in advance of all
applicable deadlines whether or not 3BP will defend against such Patent Challenge. If 3BP decides that it does not
wish to defend against such Patent Challenge, Clovis will thereafter have the right, but not the obligation, to assume
defense of such Patent Challenge at its own expense. If 3BP decides that it wishes to defend against such Patent
Challenge, Clovis shall have the right, but not the obligation, to participate in such defense. If Clovis elects to
participate in the defense against an action, Clovis will notify 3BP within [***] ([***]) Business Days, and (i) with
respect to any Patent Opposition, the Parties will jointly control the defense using counsel acceptable to each Party
and sharing expenses equally and neither Party will have the right to settle any proceeding without the prior written
consent of such other Party, such consent not to be unreasonably withheld or delayed and (ii) with respect to any
Patent Challenge proceeding other than a Patent Opposition, 3BP will permit Clovis to participate in the proceedings
to the extent permissible under Applicable Laws and to be represented by its own counsel at Clovis’ expense and
3BP will reasonably consider comments of Clovis with respect to any defense strategy, but will have sole and final
decision-making authority with respect to such defense strategy.
(c) Defense Participation. Promptly upon being notified of any proceedings which are subject to
joint participation pursuant to either Section 9.5(a) or Section 9.5(b), the Parties will agree on and enter into a
“common interest agreement” as may be necessary to protect privileged communications between the Parties and
wherein the Parties agree to their shared, mutual interest in the outcome of such proceeding, and thereafter the Parties
will promptly meet to consider the claims or assertions in such proceedings and the appropriate course of action.
9.6 Enforcement of FAP Patents.
(a) Notification and Dispute Resolution. If either Party becomes aware of any existing or
threatened infringement of any FAP Patent, which infringing activity involves the manufacture, use, import, offer for
sale or sale of any Product in the Licensed Territory or Retained Territory (a “Product Infringement”), it will
promptly notify the other Party in writing to that effect, and the Parties will consult with each other regarding any
actions to be taken with respect to such Product Infringement.
(b) Enforcement in Licensed Territory. In the Licensed Territory, Clovis will have the sole
authority and discretion to bring an infringement action against any person or entity engaged in a Product
Infringement of the FAP Patents, at Clovis’ cost and expense provided, however, that: (i) to the extent reasonably
practicable, prior to initiating any such suit or proceeding, the Parties will discuss the extent and effect of the Product
Infringement; (ii) Clovis will promptly disclose to 3BP all material information or, with respect to 3BP Patents and
Joint Patents, all information, related to such action, and (iii) with respect to 3BP Patents and Joint Patents, Clovis
shall discuss with 3BP any enforcement strategy and consider in good faith any reasonable comments made by 3BP
in relation thereto. If Clovis elects not to bring such action, the Parties will negotiate in good faith to provide 3BP
with the authority and discretion to bring such action at its own cost and expense, subject to Sections 9.6(d) and
9.6(e), provided however, that 3BP shall in any event have the right, upon its request, to bring such action, if the
Product Infringement is expected to materially affect the overall amount of royalties to be payable to 3BP pursuant to
this Agreement and/ or the Sublicense Revenues.
(c) Enforcement in Retained Territory. In the Retained Territory, 3BP will have the sole
authority and discretion to bring an infringement action against any person
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or entity engaged in a Product Infringement of the FAP Patents, at 3BP’s cost and expense; provided, however, that:
(i) to the extent reasonably practicable, prior to initiating any such suit or proceeding, the Parties will discuss the
extent and effect of the Product Infringement; and (ii) 3BP will promptly disclose to Clovis all material information
or, with respect to Clovis Patents and Joint Patents, all information, related to such action, and (iii) with respect to
Clovis Patents and Joint Patents, 3BP shall discuss with Clovis any enforcement strategy and consider in good faith
any reasonable comments made by Clovis in relation thereto . If 3BP elects not to bring such action, the Parties will
negotiate in good faith to provide Clovis with the authority and discretion to bring such action at its own cost and
expense, subject to Sections 9.6(d) and 9.6(e).
(d) Cooperation. Each Party will provide to the enforcing Party under this Section 9.6
reasonable assistance in such enforcement, at such enforcing Party’s request and expense, including joining such
action as a party plaintiff if required by Applicable Laws to pursue such action. The enforcing Party will keep the
other Party regularly informed of the status and progress of such enforcement efforts and will reasonably consider the
other Party’s comments on any such efforts. The non-enforcing Party will be entitled to separate representation in
such matter by counsel of its own choice and at its own expense, but such Party will at all times cooperate fully with
the enforcing Party. If 3BP is the enforcing Party, no settlement of any Product Infringement action which restricts
or adversely affects the scope of the licenses granted by 3BP to Clovis under the terms of this Agreement , or which
may adversely affect the Commercialization of a Product in the Licensed Territory, will be entered into by 3BP
without the prior written consent of Clovis, which consent shall not be unreasonably withheld or delayed. If Clovis
is the enforcing Party, no settlement of any such Product Infringement action which restricts the scope, or adversely
affects the enforceability of a FAP Patent, which restricts or adversely affects the scope of the licenses granted by
Clovis to 3BP under the terms of this Agreement or which may adversely affect the Commercialization of a Product
(including, may adversely affect the amount of royalties to be payable to 3BP pursuant to this Agreement) shall be
entered into by Clovis without the prior written consent of 3BP, which consent shall not be unreasonably withheld or
delayed.
(e) Expenses and Recoveries. The enforcing Party bringing a claim, suit or action under this
Section 9.6 will be solely responsible for any expenses incurred by such Party as a result of such claim, suit or action
and if both Parties collectively bring the claim, suit or action under this Section 9.6, they will be jointly responsible
for any expenses incurred by them as a result of such claim, suit or action. If a Party/ies recover(s) monetary
damages in a claim, suit or action under Section 9.6, such recovery will be allocated first to the reimbursement of
any reasonable expenses incurred by the Parties in such litigation, and any remaining amounts will be allocated as
follows: (i) in the case of any recovery for a Product Infringement in the Licensed Territory pursuant to an
infringement action brought by Clovis or 3BP under Section 9.6(b), such recoveries will be deemed Net Sales of
Clovis if Clovis brings an infringement action, and will to [***] percent ([***]%) be deemed Net Sales of Clovis and
to the other [***] percent ([***]%) be paid directly to 3BP if 3BP only brings an infringement action; and (ii) in the
case of any recovery for a Product Infringement in the Retained Territory pursuant to an infringement action solely
brought by 3BP under Section 9.6(c), 3BP will be entitled to retain all such recoveries.
9.7 New Lead Candidate; Reimbursement of External Patent Costs.
(a) Additional [***] Applications. Subject to the rights in Sections 9.2(b), 9.4(a), and 9.4(b), if
the JSC selects a new Lead Candidate during the Term, then [***].
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(b) Costs for 3BP Patents in the Licensed Territory. If, at any time during the Term, the [***]
Covers specifically any then-current Lead Candidate and/ or Backup Candidate and the Parties agree that a [***]
should not be filed in a specific jurisdiction of the Licensed Territory, then Clovis will reimburse 3BP [***] percent
([***]%) of its External Patent Costs attributable to that jurisdiction of the Licensed Territory that have been incurred
by 3BP in connection with the filing, prosecution, maintenance and defense of such [***] in such jurisdiction of the
Licensed Territory prior to the selection of such compound as Lead Candidate and/or Backup Candidate and [***]
percent ([***]%) of all future External Patent Costs incurred by 3BP in that jurisdiction of the Licensed Territory
thereafter. If such External Patent Costs incurred by 3BP cannot be specifically and exclusively allocated to activities
in that jurisdiction of the Licensed Territory, Clovis shall reimburse [***] percent ([***]%) of all such previous and
future External Patent Costs incurred by 3BP in both the Licensed Territory and the Retained Territory. 3BP will
invoice Clovis for all such previous External Patent Costs to be reimbursed hereunder within [***] ([***]) days after
the date the Parties have agreed that a [***] should not be filed, and on a calendar quarterly basis thereafter, which
invoices will be accompanied by reasonably detailed documentation of such External Patent Costs. Clovis will pay
any such invoices within [***] ([***]) days of the invoice date.
9.8 Infringement of Third Party Rights. Without prejudice to the representations and warranties and
covenants, if any Product becomes the subject of a Third Party’s claim or assertion of infringement of such Third
Party’s Intellectual Property Rights in any jurisdiction in connection with the Development, Manufacture or
Commercialization of the Product, then without prejudice to any indemnification obligations, each Party will
promptly notify the other Party, and the Parties will agree on and enter into a “common interest agreement” as may
be necessary to protect privileged communications between the Parties and wherein the Parties agree to their shared,
mutual interest in the outcome of such potential dispute, and thereafter, the Parties will promptly meet to consider the
claim or assertion and the appropriate course of action. Unless agreed otherwise by the Parties (including, if it is
agreed by the JSC pursuant to Section 8.7(c)(i) that Clovis shall obtain the Third Party license) and without prejudice
to any indemnification obligations, each Party will be solely responsible for defending itself against any such claim
or assertion relating to its activities, whether in its territory or for its territory (e.g., Development by Clovis in the
Retained Territory in support of Regulatory Approval for the Licensed Territory), at its sole expense. To the extent
the other Party engages separate counsel in such defense, it will be at its own cost and expense. The defending Party
will keep the other Party fully informed of such claim and its defense and will reasonably consider and seek to
accommodate any timely comments of the other Party with respect thereto.
9.9 Patent Marking. Clovis will, and will require its Affiliates and Sublicensees to, mark Products sold
by or on behalf of it hereunder with appropriate patent numbers or indicia to the extent permitted by Applicable
Laws, and in those countries in which such markings or such notices impact recoveries of damages or equitable
remedies available with respect to infringement of Clovis Patents or 3BP Patents or Joint Patents.
10. CONFIDENTIALITY
10.1 Confidentiality Obligations. The Parties agree that during the Term and for a period of five (5)
years thereafter, a Party receiving Confidential Information of the other Party will: (a) use Diligent Efforts to
maintain in confidence such Confidential Information (but not less than those efforts as such Party uses to maintain
in confidence its own proprietary industrial or intellectual information of similar kind and value and in no event less
than a reasonable degree of care customary in the pharmaceutical industry for those kinds of information); (b) not
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disclose such Confidential Information to any Third Party without prior written consent of the other Party, except to
the extent expressly authorized by this Agreement or otherwise agreed in writing by the Parties; and (c) not use such
other Party’s Confidential Information for any purpose except those permitted by this Agreement or in connection
with exercising such Party’s rights and/or fulfilling their obligations under this Agreement.
10.2 Exceptions. The obligations in Section 10.1 will not apply with respect to any portion of the other
Party’s Confidential Information that the receiving Party can show by competent written proof:
(a) was known to the receiving Party, other than under an obligation of confidentiality, at the time
of disclosure by the disclosing Party;
(b) was generally available to the public or otherwise part of the public domain, at the time of
disclosure by the other Party;
(c) becomes generally available to the public or otherwise part of the public domain after the
disclosure by the other Party, other than through any act or omission of the receiving Party in breach of this
Agreement;
(d) is subsequently disclosed to the receiving Party by a Third Party who has a legal right to make
such disclosure and who did not obtain such information directly or indirectly from the other Party; or
(e) is subsequently independently developed by employees or contractors of the receiving Party
who had no access to or knowledge of the other Party’s Confidential Information.
10.3 Authorized Disclosure. A Party may disclose the Confidential Information belonging to the other
Party to the extent such disclosure is reasonably necessary in the following instances; provided that unless otherwise
provided below, notice of any such disclosure will be provided as soon as practicable to the other Party:
(a) filing or prosecuting Patents in accordance with Sections 9.2(b) and 9.4;
(b) complying with the requirement of Regulatory Authorities with respect to obtaining and
maintaining Regulatory Approval of Products;
(c) prosecuting or defending litigation as contemplated by this Agreement, provided that the Party
obligated to disclosure will promptly notify the other Party of such required disclosure and will, upon the other
Party’s request, use reasonable efforts to assist the other Party, at such other Party’s expense, in obtaining a
protective order preventing or limiting the required disclosure;
(d) disclosure to its or its Affiliates’ employees, agents, consultants, contractors, licensees or
sublicensees on a need-to-know basis for the sole purpose of performing its obligations or exercising its or its
Affiliates’ rights under this Agreement or any other agreement between the Parties or their Affiliates consistent with
the terms of this Agreement; provided that in each case, prior to disclosure the disclosees are bound by written
obligations of confidentiality and non-use consistent with those contained in this Agreement;
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(e) disclosure to each Party’s board of directors (or similar governing body) on a confidential
basis or to any bona fide potential or actual investor, sublicensee, acquiror or merger partner or other potential or
actual financial partner (including any banks, venture capital companies and public funding agencies) for the sole
purpose of evaluating an actual or potential investment, sublicense, acquisition, grant of loan or funding or other
business relationship; provided that in connection with such disclosure, the disclosing Party will inform each
disclosee of the confidential nature of such Confidential Information and prior to disclosure obligate and cause each
disclosee to treat such Confidential Information as confidential (unless such partner is subject to confidentiality by
way of laws or mandatory professional rules); or
(f) complying with Applicable Laws, including regulations promulgated by applicable security
exchanges, court orders or administrative subpoenas or orders, provided that the Party obligated to disclosure will
promptly notify the other Party of such required disclosure and will, upon the other Party’s request, use reasonable
efforts to assist the other Party, at such other Party’s expense, in obtaining a protective order preventing or limiting
the required disclosure.
10.4 Publicity; Terms of Agreement.
(a) On or promptly after the Effective Date, the Parties will jointly issue a public announcement
of the execution of this Agreement in a form mutually agreed upon. Neither Party will issue any subsequent press
release or make other disclosures regarding this Agreement or the Parties’ activities hereunder, or any results or data
arising hereunder, except (i) with the other Party’s prior written consent, such consent not to be unreasonably
withheld; or (ii) in accordance with this Article 10. Notwithstanding the foregoing, to the extent information
regarding this Agreement or the Parties’ activities hereunder has already been publicly disclosed, either Party may
subsequently disclose the same information to the public without the consent of the other Party and provided such
information remains accurate as of such time.
(b) If either Party desires to make a public announcement in connection with this Agreement, such
as press releases containing Development achievements made under this Agreement or presentations regarding a
Product made at financial/ investment conferences (e.g., on the JP Morgan conference), such Party will give
reasonable prior advance notice of the proposed text of such announcement or presentation to the other Party for its
prior review and approval (except as otherwise provided herein), such approval not to be unreasonably withheld,
except that in the case of an ad hoc press release or governmental filing required by law, regulation or stock
exchange rules, the disclosing Party will provide the other Party with such advance notice as it reasonably can and
will not be required to obtain approval therefor if otherwise mandatory timelines cannot be complied with. A Party
commenting on such a proposed press release or governmental filing will provide its comments, if any, within [***]
([***]) Business Days after receiving the press release or presentation for review. In addition, (i) any such press
release or financial/ investor presentation by Clovis will include, and Clovis will ensure that any press release or
presentation of its Affiliates will include, in each case subject to any word-count restraints, a reference to 3BP as the
developer of the underlying technology, (ii) each Party shall refer in any press release or financial/ investor
presentation to the collaboration of the Parties hereunder, and (iii) each Party shall be entitled to propose to display in
any press release and/ or financial/ investor presentation submitted for review hereunder its logo and/ or the logo of
the other Party.
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10.5 Technical Publications. Neither Party may publish peer reviewed manuscripts or give other
forms of public disclosure such as abstracts or congress presentations, of results of studies carried out under this
Agreement (collectively “Technical Publication”), without the opportunity for prior review and coordination by the
other Party, except to the extent required by Applicable Laws. A Party seeking a Technical Publication will provide
the other Party the opportunity to review and comment on any such proposed publication at least [***] ([***]) days
(but only [***] ([***]) Business Days for abstracts or congress presentations) prior to its intended submission for
presentation or publication. The other Party will provide the Party seeking publication with its comments in writing,
if any, within [***] ([***]) days (but only [***] ([***]) Business Days for abstracts or congress presentations) after
receipt of such proposed publication. Shorter review timelines are acceptable so long as a Party notifies the other
Party at least [***] ([***]) Business Days prior to sending the proposed publication to the other Party for review and
comment of such shorter timelines and provided that the time for the other Party to review and comment the
proposed publication shall in no event be less than [***] ([***]) days (or, respectively, [***] ([***]) Business Days
for abstracts or congress presentations). In the event of such a shorter timeline, the other Party will provide the Party
seeking publication with its comments in writing, if any, within such notified shorter timeline. The Party seeking
publication will consider in good faith any comments thereto provided by the other Party, provided that it will in any
event comply with the other Party’s request to remove such other Party’s Confidential Information from the proposed
publication. In addition, the Party seeking a Technical Publication will delay the submission for a period up to [***]
([***]) days if the other Party can demonstrate reasonable need for such delay, including the preparation and filing of
a Patent application. If the other Party fails to provide its comments to the Party seeking publication within the
applicable review and commenting time set forth in the preceding sentences, such other Party will be deemed not to
have any comments, and the Party seeking publication will be free to publish in accordance with this Section 10.5
after the respective review timeline has elapsed. The Party seeking publication will provide the other Party with a
copy of the abstract, congress presentation, or manuscript at the time of the submission. Each Party agrees to
acknowledge the contributions of the other Party and its employees in all Technical Publications as scientifically
appropriate, unless such other Party objects, and provided that in any event a publication by Clovis will include, and
Clovis will ensure that any publication of its Affiliates or Sublicensees will include, a reference to 3BP as the
developer of the underlying technology.
10.6 Equitable Relief. Each Party acknowledges that its breach of this Article 10 may cause irreparable
harm to the other Party, which might not be reasonably or adequately compensated in damages in an action at law.
By reasons thereof, each Party agrees that the other Party may be entitled, in addition to any other remedies it may
have under this Agreement or otherwise, to seek preliminary and permanent injunctive and other equitable relief to
prevent or curtail any actual or threatened breach of the obligations relating to Confidential Information set forth in
this Article 10 by the other Party.
11. TERM AND TERMINATION
11.1 Term. This Agreement will become effective on the Effective Date and, unless earlier terminated
pursuant to this Article 11 or by mutual written agreement, will remain in effect on a Product-by-Product basis until
the expiration of the Royalty Term in the last country of the Licensed Territory and will continue thereafter for so
long as Clovis is Developing or Commercializing such Product in any country in the Licensed Territory (the
“Term”), provided that upon expiration of the Royalty Term in a country, the licenses and rights granted to Clovis
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under this Agreement will, with respect to such country, become non-exclusive, royalty-free and fully paid-up and all
licenses and other rights of use granted by Clovis to 3BP hereunder, including the licenses and rights granted
pursuant to Section 7.2 and pursuant to Section 5.3, shall survive without change.
11.2 Termination by 3BP for Country-Specific Non-Activity. On a Product-by-Product basis, beginning
on the [***] ([***]) anniversary of the date of receipt for a Product of its initial Marketing Authorization in the U.S.
that is a full approval by the FDA (i.e., not an accelerated approval granted pursuant to 21 CFR 314, also known as
‘subpart H’), 3BP shall have the right to terminate this Agreement on a country-by-country basis for the respective
Product in each country of the Licensed Territory in which, at such date, Clovis is not then Developing such Product
in such country(ies) with Diligent Efforts, either itself directly, or indirectly through an Affiliate or a Sublicensee.
11.3 Discretionary Termination by Clovis; Termination for Cause by Clovis.
(a) Without Cause. Clovis will be permitted to terminate this Agreement in full, without cause
and subject to payment to 3BP of an amount equal to [***] Dollars ($[***]), upon [***] ([***])] days prior written
notice to 3BP.
(b) For [***] Reason
(i) Clovis will have the right to terminate this Agreement on a Therapeutic Product-by-
Therapeutic Product basis, and without payment of the amount set forth under Section 11.3(a) above due from
Clovis to 3BP on account of such termination, if the board of directors of Clovis concludes [***]. If the board of
directors of Clovis makes such a determination, Clovis will provide written notice to 3BP describing the issues upon
which the board based its conclusion.
(ii) Within [***] ([***]) days of receipt of a notice of termination pursuant to
Section 11.3(b)(i), 3BP will consider the decision in good faith, and if 3BP agrees, it will so notify Clovis in writing,
and the Agreement will terminate [***] ([***]) days after the date of Clovis’ original termination notice. If 3BP
notifies Clovis that 3BP does not agree with the determination made by the Clovis board of directors, the dispute (a
“Determination Dispute”) will be referred to an expert for resolution in accordance with Exhibit 11.3. If the expert
agrees with the conclusion reached by the Clovis board of directors, the Agreement will terminate [***] ([***]) days
after the date of the expert’s decision; otherwise the Agreement will, at Clovis’ choice, continue in full force and
effect or be deemed terminated by Clovis pursuant to Section 11.3(a).
11.4 Termination for Material Breach. If either Party believes that the other Party is in breach of its
material obligations hereunder, then the non-breaching Party may deliver notice of such breach to the other Party
specifying the nature of the alleged breach in reasonable detail. The allegedly breaching Party will have [***] ([***])
days from such notice to dispute or cure such breach. If the Party receiving notice of breach fails to cure such
breach within
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such [***] ([***]) day period, whether through specific performance or payment of money damages or through a
combination of specific performance and payment of money damages, then the non-breaching Party may terminate
this Agreement in its entirety, provided that, if the allegedly breaching Party in good faith disputes such material
breach or disputes the failure to cure or remedy such material breach and provides written notice of that dispute to
the other Party, the matter will be addressed under the dispute resolution provisions in Article 14, and the non-
breaching Party may or, at its discretion, may not terminate this Agreement until it has been determined under
Article 14 that the conditions for termination of this Section 11.4 are met. If the non-breaching Party has elected not
to terminate until it has been determined that the conditions for termination are met and such determination is made
in accordance with the dispute resolution provisions in Article 14, such termination will then be effective upon
written notification from the non-breaching Party to the breaching Party. For clarification purpose, for Clovis’
material breach of its obligations set forth in Section 3.4 (Development Diligence; Standards of Conduct) and
Section 5.4 (Commercial Diligence), 3BP will only be permitted to terminate the Agreement with respect to those
countries to which such breach relates.
11.5 Termination for Bankruptcy Event. Either Party may terminate this Agreement if the other
Party is generally unable to meet its debts when due, or makes a general assignment for the benefit of its creditors, or
there shall have been appointed a receiver, trustee or other custodian for such Party for or a substantial part of its
assets, or any case or proceeding shall have been commenced or other action taken by or against such Party in
bankruptcy or seeking the reorganization, liquidation, dissolution or winding-up of such Party or any other relief
under any bankruptcy, insolvency, reorganization or other similar act or law, and any such event shall have continued
for [***] ([***]) days undismissed, unstayed, unbonded and undischarged. In such circumstances, the other Party
may, upon notice to such Party, terminate this Agreement, such termination to be effective upon such Party's receipt
of such notice.
11.6 Termination for Rejection of Performance. Each Party shall be entitled to terminate this
Agreement if an insolvency administrator of the other Party’s assets rejects performance of this Agreement
(Erfüllungsablehnung).
11.7 Effects of Termination of the Agreement. Upon any early termination of this Agreement (that is,
for avoidance of doubt, not by operation of expiration pursuant to Section 11.1), in its entirety or on a country-by-
country basis:
(a) Termination of Licenses.
(i) Other than termination by Clovis on the basis of a material breach of the Agreement
by 3BP under Section 11.4 or by Clovis pursuant to Section 11.6 (the effects of which on the licenses are set forth in
subclause (ii) or (iii), respectively, below), (A) all licenses granted to Clovis under Section 7.1 will terminate, but in
the case of termination on a country-by-country basis, solely to the extent such licenses relate to those countries so
terminated; provided that Clovis will retain a non-exclusive license under Section 7.1 to sell, offer for sale and
import remaining inventories of the Products in terminated countries for a period not exceeding [***] ([***]) months
(and make respective royalty payments in accordance with Section 8.7 for such sales and payment of Sublicense
Revenues in accordance with Section 8.6) and further provided that if and to the extent such termination of Clovis’
license is based upon termination by 3BP pursuant to Section 11.2 or Section 11.4 last sentence, the respective
countries in which Clovis’ license so terminates shall be deemed included in the Retained Territory with all rights of
3BP relating to the Retained Territory applying also to these countries; and (B) all licenses and other rights of use
granted by Clovis
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to 3BP hereunder (including the right to use Products Marks in the Retained Territory if granted pursuant to Section
5.3) will survive without change.
(ii) In the case of termination of this Agreement by Clovis pursuant to Section 11.4 due to
a material breach by 3BP, without prejudice to any other remedies of Clovis, including the right to claim damages:
(A) all licenses granted to Clovis under Section 7.1 will become perpetual, fully paid up and Clovis will no longer
have any obligations pursuant to this Agreement; provided, however, that Clovis will pay to 3BP, for the Royalty
Term, [***] percent ([***]%) of the royalty payments set forth in Section 8.7 and [***] percent ([***]%) of the
Sublicense Revenues set forth in Section 8.6 when they would have become due if the Agreement had not been
terminated and make respective reporting in accordance with Section 8.7(d); and (B) all licenses and other rights of
use granted by Clovis to 3BP hereunder (including the right to use Products Marks in the Retained Territory if
granted pursuant to Section 5.3) will shall survive without change.
(iii) In the case of termination of this Agreement by Clovis pursuant to Section 11.6: (A) all
licenses granted to Clovis under Section 7.1 will become perpetual, fully paid up and Clovis will no longer have any
obligations pursuant to this Agreement; provided, however, that Clovis will pay to 3BP any Milestone Payments set
forth in Section 8.5 when they would have become due if the Agreement had not been terminated, and Clovis will
pay to 3BP, for the Royalty Term, the royalty payments set forth in Section 8.7 and the Sublicense Revenues set
forth in Section 8.6 when they would have become due if the Agreement had not been terminated and make
respective reporting in accordance with Section 8.7(d); and (B) all licenses and other rights of use granted by Clovis
to 3BP hereunder (including the right to use Products Marks in the Retained Territory if granted pursuant to
Section 5.3) will shall survive without change.
(b) Sublicense Agreements; Agreements with Contract Manufacturer.
(i) Termination of this Agreement by 3BP on the basis of a material breach by Clovis
under Section 11.4 will not automatically terminate any Sublicense if the following conditions are met: (A) the
Sublicense meets the requirements of Section 7.1(c); (B) with respect to such Sublicense agreement the Sublicensee
is at the time of termination in full compliance and further, is not in breach of any provision of this Agreement; and
(C) the Sublicensee agrees to the assignment of such Sublicense to 3BP (i.e., such that 3BP will step into the role of
Clovis under such Sublicense and become the Sublicensee’s direct licensor). If all of the aforementioned conditions
are met, the Sublicense will be assigned automatically to 3BP; however if any of the conditions under (i) to (iii) are
not met, such Sublicense will automatically terminate upon termination of this Agreement.
(ii) Any termination of this Agreement for any reason other than termination by 3BP on
the basis of a material breach of Clovis (which is regulated in subsection (i) above) or by Clovis pursuant to
Section 11.6 (which is regulated by subsection (iii) below), will automatically terminate all outstanding Sublicenses,
unless (A) 3BP requests the assignment of the Sublicense agreement to 3BP, in which event it shall be automatically
assigned to 3BP, provided such assignment of the Sublicense does not require the consent of the Sublicensee
according to the governing laws of such Sublicense agreement, or (B) if the assignment of the Sublicense requires the
consent of the Sublicensee according to the governing laws of such Sublicense agreement, the Sublicensee and 3BP
agree to continue the Sublicense between them as parties.
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Sublicenses then outstanding, which shall remain in full force and effect.
(iii) Termination by Clovis pursuant to Section 11.6 shall have no effect on any
(iv) Upon any termination of this Agreement other than by Clovis on the basis of a
material breach by 3BP or by Clovis pursuant to Section 11.6, at 3BP’s request, Clovis will use Diligent Efforts to
procure the assignment to 3BP of Clovis’ then-current agreement(s) with Contract Manufacturers for the
Manufacture of Products (or components thereof).
(c) Documentation; Data. Other than termination by Clovis on the basis of a material breach of
the Agreement by 3BP under Section 11.4, at 3BP’s request, Clovis agrees to transfer to 3BP, at Clovis’ expense, the
Regulatory Documentation and Regulatory Approvals as well as any Manufacturing Documentation (including
Manufacturing Documentation of any Contract Manufacturer of Clovis and its Affiliates) relating to the Products in
such terminated country in the Licensed Territory.
(d) Return of Confidential Information. Upon termination of this Agreement each Party will
surrender to the other Party, or, if so requested by the other Party, destroy and provide the other Party with a
certificate signed by an Executive Officer of the first Party attesting to the destruction of, all copies of any
Confidential Information provided by the other Party hereunder, provided that the first Party may retain one (1) copy
of any Confidential Information in an appropriately secure location. The afore obligation of return or destruction
shall not apply to the extent a Party requires the further use of the Confidential Information of the other Party for
reason of exercising any licenses and/ or other rights which survive the termination of this Agreement.
(e) Product Mark. Other than termination by Clovis on the basis of a material breach of the
Agreement by 3BP under Section 11.4, and except where Clovis can reasonably demonstrate that Commercializing
the Product under the Product Mark in the terminated country(ies) is detrimental to Clovis’ sales in any non-
terminated countries, at 3BP’s request, Clovis will consider in good faith or, in the event of termination of this
Agreement by 3BP on the basis of a material breach of the Agreement by Clovis under Section 11.4 Clovis will be
obligated to the grant of a royalty-free, fully paid-up, license to 3BP, for a period of time allowing 3BP to switch the
Product Mark, under any and all Product Marks then being used by Clovis solely and exclusively for any such
Product and transfer to 3BP the right to use during the transition period any domain names containing solely such
Product Marks, in each case only to the extent that such Product Mark is not also used for any product Controlled by
Clovis which does not fall under this Agreement and does not make reference to any other trade name or trademark
of Clovis.
(f) Post Termination Technology Transfer. Other than termination by Clovis on the basis of a
material breach of the Agreement by 3BP under Section 11.4, Clovis will reasonably cooperate with 3BP, at 3BP’s
request, in order to enable 3BP to promptly assume the Development and/or Commercialization of all Products then
being Commercialized or in Development by Clovis for Commercialization in the Licensed Territory (or in a
particular country if such termination is only as to such country). Such cooperation and assistance will be provided
in a timely manner (having regard to the nature of the cooperation or assistance requested). Such assistance shall be
at 3BP’s reasonable cost and expenses, except in the event of termination by 3BP on the basis of a material breach of
the Agreement by Clovis under Section 11.4 or termination by Clovis under Section 11.3(a), in which event it shall
be at Clovis’ cost and expense.
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11.8 Accrued Rights; Survival. Termination or expiration of this Agreement for any reason (i) will be
without prejudice to any right or obligation which will have accrued prior to such termination or expiration,
including damages arising from any breach under this Agreement and (ii) will leave unaffected, the following
provisions which will survive any expiration or termination of this Agreement: Articles 1, 10, 13 (with respect to
Third Party claims based on events occurring during the Term), 14, and Sections 8.11, 9.2, 11.7, this 11.8, 14 and
16.10.
12. REPRESENTATIONS AND WARRANTIES AND COVENANTS
12.1 Mutual Representations and Warranties. Each Party hereby represents and warrants to the other
Party by way of an independent guarantee within the meaning of Section 311 of the German Civil Code
(Selbständiges Garantieversprechen) as follows:
(a) Corporate Existence. As of the Effective Date, it is a company or corporation duly
organized, validly existing, and in good standing, if applicable, under the Applicable Laws of the jurisdiction in
which it is incorporated.
(b) Corporate Power, Authority and Binding Agreement. As of the Effective Date: (i) it has
the corporate power and authority and the legal right to enter into this Agreement, and to carry out and otherwise
perform its obligations hereunder; (ii) it has taken all necessary corporate action on its part required to authorize the
execution and delivery of this Agreement and the performance of its obligations hereunder; (iii) this Agreement has
been duly executed and delivered on behalf of such Party, and constitutes a legal, valid, and binding obligation of
such Party that is enforceable against it in accordance with its terms, and (iv) the carrying out and other performance
of its obligations under this Agreement by such Party (A) does not conflict with, or contravene or constitute any
default under, any agreement, instrument or understanding, oral or written, to which it is a party, including its
certificate of incorporation or by-laws, and (B) does not violate Applicable Law or any judgment, injunction, order or
decree of any governmental authority having jurisdiction over it.
12.2 Additional Representations and Warranties of 3BP. 3BP represents and warrants to Clovis by way
of an independent guarantee within the meaning of Section 311 of the German Civil Code (Selbständiges
Garantieversprechen) (except for the representation and warranty pursuant to Section 12.2(i) in relation to which
3BP represents and guarantees by way of a simple obligation (Verpflichtung)) that, as of the Effective Date:
(a) Title; Encumbrances. [***].
(b) Sufficiency. Exhibit 1.3 sets forth a complete and accurate list of all 3BP Patents in existence
as of the Effective Date. [***].
(c) Non-Infringement. [***].
(d) No Out-Bound Agreements. 3BP has not granted any Third Party (including any academic
organization or agency), or any Affiliate, any licenses to the Products (except for rights outside of the Licensed
Territory).
(e) Proper Assignment of Rights. 3BP has obtained from all individuals who participated in any
respect in the invention or authorship of any 3BP Technology owned by 3BP or its Affiliates effective assignments
of all ownership rights of such individuals in
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such 3BP Technology as are necessary to grant the licenses hereunder, either pursuant to written agreement or by
operation of law.
(f) Pending or Threatened Proceedings. There are no actual, pending, or announced actions,
suits, proceedings or formal governmental investigations involving the Products and/or the 3BP Technology relating
to the Products by or against 3BP or any of its Affiliates, in or before any court, governmental or Regulatory
Authority. There are no judgments against or litigation settlements entered into by 3BP relating to the 3BP
Technology or the Products.
(g) Intellectual Property Proceedings. 3BP is not aware of any fact or circumstance which
would make the 3BP Patents invalid and unenforceable in their entirety. Neither 3BP nor any of its Affiliates have
received any Third Party written communication alleging that any of the 3BP Patents are unpatentable, invalid or
unenforceable or are subject to interference, reexamination, reissue, revocation, opposition, appeal or other
administrative proceeding. 3BP has not taken any action or failed to take any action, which action or failure
reasonably could be expected to result in the abandonment, cancellation, forfeiture, relinquishment, invalidation or
unenforceability of any of the 3BP Patents.
(h) Debarment. In the course of the development of Products, 3BP has not used any employee or
consultant who has been debarred by any Regulatory Authority, or, to 3BP’s knowledge, is or was the subject of
debarment proceedings by a Regulatory Authority.
(i) Due Diligence Data. [***].
(j) Notice of Infringement or Misappropriation. Neither 3BP nor its Affiliates have received
any written notice from any Third Party asserting or alleging that any research or development of the Products by
3BP or its Affiliates prior to the Effective Date infringed or misappropriated the Intellectual Property Rights of such
Third Party.
12.3 Mutual Covenants.
(a) No Debarment. In the course of the Development of Products, neither Party nor its Affiliates
will use any employee or consultant who is debarred by any Regulatory Authority, or, to such Party’s knowledge, is
the subject of debarment proceedings by a Regulatory Authority. Each Party will notify the other Party promptly
upon becoming aware that any of its or its Affiliates’ employees or consultants has been debarred or is the subject of
debarment proceedings by any Regulatory Authority.
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(b) Compliance. Each Party and its Affiliates will comply in all material respects with all
Applicable Laws in the Development, Manufacture and Commercialization of the Product and performance of its
obligations under this Agreement.
12.4
Disclaimer.
FITNESS FOR A PARTICULAR PURPOSE,
EXCEPT AS EXPRESSLY STATED IN THIS AGREEMENT,
NO
REPRESENTATIONS OR WARRANTIES WHATSOEVER, WHETHER EXPRESS OR IMPLIED, INCLUDING
WARRANTIES OF MERCHANTABILITY,
NON-
OR NON-MISAPPROPRIATION OF THIRD PARTY INTELLECTUAL PROPERTY
INFRINGEMENT,
RIGHTS, ARE MADE OR GIVEN BY OR ON BEHALF OF A PARTY, AND ALL REPRESENTATIONS AND
WARRANTIES, WHETHER ARISING BY OPERATION OF LAW OR OTHERWISE, ARE HEREBY
EXPRESSLY EXCLUDED.
NOTWITHSTANDING ANYTHING TO THE CONTRARY IN THIS
AGREEMENT, BOTH PARTIES ACKNOWLEDGE AND AGREE THAT, NOTWITHSTANDING THE
DILIGENT EFFORTS OF THE PARTIES,
THE ACTIVITIES TO BE CONDUCTED UNDER THE
COLLABORATION AND THE GLOBAL DEVELOPMENT PLAN ARE INHERENTLY UNCERTAIN, AND
THAT THERE ARE NO ASSURANCES THAT THE PARTIES WILL SUCCESSFULLY IDENTIFY A LEAD
CANDIDATE OR THAT ANY SUCH CANDIDATE WILL BE SUCCESSFULLY DEVELOPED AND
COMMERCIALIZED BY CLOVIS AS A PRODUCT.
13. INDEMNIFICATION AND LIMITATION OF LIABILITY
13.1 Indemnification by Clovis. Clovis will defend, indemnify, and hold 3BP and its Affiliates and their
respective officers, directors, employees, and agents (the “3BP Indemnitees”) harmless from any and all damages or
other amounts payable to a Third Party claimant, as well as any reasonable attorneys’ fees and costs of litigation
incurred by such 3BP Indemnitees, all to the extent resulting from claims, suits, proceedings or causes of action
brought by such Third Party (“Claims”) against such 3BP Indemnitees to the extent arising from or based upon:
(a) the Development, Manufacture or Commercialization of the Products by or on behalf of Clovis or its Affiliates or
its or their Sublicensees (excluding in all cases 3BP or its Affiliates or sublicensees), including infringement of Third
Party Intellectual Property Rights in such Development, Manufacture and/ or Commercialization; (b) the negligent or
willful breach of any of Clovis’ obligations under this Agreement, including (but without the requirement of
negligence or willful misconduct) Clovis’ representations and warranties set forth herein; (c) the willful misconduct
or gross negligence of any Clovis Indemnitee or Sublicensees; or (d) the use by Clovis or its Affiliates or its or their
Sublicensees in the Licensed Territory of Development Data or Regulatory Documentation supplied by 3BP to
Clovis under this Agreement. Notwithstanding the foregoing, Clovis will not have any responsibility hereunder for
any Claims to the extent arising from any breach of any of 3BP’s obligations under this Agreement, including 3BP’s
representations and warranties set forth herein.
13.2 Indemnification by 3BP. 3BP will defend, indemnify, and hold Clovis and its Affiliates and their
respective officers, directors, employees, and agents (the “Clovis Indemnitees”) harmless from and against any and
all damages or other amounts payable to a Third Party claimant, as well as any reasonable attorneys’ fees and costs
of litigation incurred by such Clovis Indemnitees, all to the extent resulting from Claims against such Clovis
Indemnitees to the extent arising from or based upon: (a) the Development, Manufacture or Commercialization of the
Products by or on behalf of 3BP or its Affiliates or its or their sublicensees (excluding in all cases Clovis, its
Affiliates or its Sublicensees); (b) the negligent or willful breach of any of 3BP’s obligations under this Agreement,
including (but without the
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requirement of negligence or willful misconduct, except for breach of the representations and warranties given under
Section 12.2(i) which for an indemnification obligation under this section requires negligence or willful
misconduct)) 3BP’s representations and warranties set forth herein; (c) the willful misconduct or gross negligence of
any 3BP Indemnitee; or (d) the use by 3BP or its Affiliates or its or their sublicensees in the Retained Territory of
Development Data or Regulatory Documentation supplied by Clovis to 3BP under this Agreement. Notwithstanding
the foregoing, 3BP will not have any responsibility hereunder for any Claims to the extent arising from any breach of
any of Clovis’ obligations under this Agreement, including Clovis’ representations and warranties set forth herein.
13.3 Conditions to Indemnification. The Party claiming indemnity under this Article 13 (the
“Indemnified Party”) will give written notice to the Party from whom indemnity is being sought (the
“Indemnifying Party”) promptly after learning of such Claim in relation to which it wishes to claim indemnification
hereunder, provided that the failure to promptly provide such notice will not relieve the Indemnifying Party of any of
its indemnification obligations hereunder, except to the extent that the Indemnifying Party’s defense of the relevant
Claim is prejudiced by such failure. The Indemnifying Party may upon such notice assume the defense of the Claim,
and the Indemnified Party will provide the Indemnifying Party, upon the Indemnifying Party's request, with
reasonable assistance, at the Indemnifying Party’s expense, in connection with the defense of the Claim for which
indemnity is being sought. The Indemnified Party may participate in and monitor such defense with counsel of its
own choosing at its sole expense. The Indemnifying Party will not settle any Claim without the prior written consent
of the Indemnified Party, not to be unreasonably withheld. So long as the Indemnifying Party is actively defending
the Claim in good faith, the Indemnified Party will not settle or compromise any such Claim without the prior written
consent of the Indemnifying Party. If the Indemnifying Party does not assume and conduct the defense of the Claim
as provided above, (i) the Indemnified Party may defend against, consent to the entry of any judgment, or enter into
any settlement with respect to such Claim in any manner the Indemnified Party may deem reasonably appropriate
(and the Indemnified Party need not consult with, or obtain any consent from, the Indemnifying Party in connection
therewith), and (ii) the Indemnifying Party will remain responsible to indemnify the Indemnified Party as provided in
this Article 13.
13.4 Limitation of Liability.
(a) EXCEPT FOR (I) ANY CLAIMS RELATED TO ONE PARTY’S INFRINGEMENT OF
THE OTHER PARTY’S INTELLECTUAL PROPERTY OUTSIDE OF THE RIGHTS AND LICENSES
GRANTED HEREUNDER, ANY BREACH OF CONFIDENTIALITY OR THE PROVISIONS OF SECTION 7.5,
(II) DAMAGES OR AMOUNTS PAYABLE TO A THIRD PARTY CLAIMANT UNDER SECTIONS 13.1 OR
13.2 (INCLUDING FOR DEATH OR BODILY INJURY), AND/ OR (III) ANY SITUATION WHERE A
LIMITATION OF LIABILITY IS NOT PERMISSIBLE UNDER THE GOVERNING LAWS, NEITHER PARTY
WILL BE LIABLE TO THE OTHER FOR ANY SPECIAL, CONSEQUENTIAL, INCIDENTAL, PUNITIVE, OR
INDIRECT DAMAGES ARISING FROM OR RELATING TO ANY BREACH OF THIS AGREEMENT,
REGARDLESS OF ANY NOTICE OF THE POSSIBILITY OF SUCH DAMAGES; SUBJECT TO THAT THE
TERMS ‘SPECIAL, CONSEQUENTIAL, INCIDENTAL, PUNITIVE, OR INDIRECT DAMAGES’ AS USED
BEFORE SHALL BE UNDERSTOOD AND CONSTRUED AS THOSE DAMAGES WHICH ARE NOT THE
NATURAL AND/OR PROBABLE CONSEQUENCE OF, WITH RESPECT TO (I) ABOVE, THE BREACH OR,
WITH RESPECT TO (II) ABOVE, THE SITUATION GIVING RISE TO THE THIRD PARTY CLAIM.
(b) Clovis will not bring any claims or action against 3BP and will not exercise any rights under
this Agreement for breach of this Agreement by 3BP to the extent the breach results from or relates to the facts and
matters disclosed in Exhibit 12.2(a).
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13.5 Insurance. Each Party will procure and maintain insurance, including product liability insurance,
with respect to its activities hereunder and which is consistent with normal business practices of prudent companies
similarly situated at all times during which any Product is being clinically tested in human subjects or commercially
distributed or sold. Each Party will provide the other Party with evidence of such insurance upon request and will
provide the other Party with written notice at least [***] ([***]) days prior to the cancellation, non-renewal or
material changes in such insurance. It is understood that such insurance will not be construed to create a limit of
either Party’s liability with respect to its indemnification obligations under this Article 13.
14. DISPUTE RESOLUTION.
14.1 Disputes. The Parties recognize that disputes as to certain matters may from time to time arise that
relate to either Party’s rights and/or obligations hereunder. It is the objective of the Parties to establish procedures to
facilitate the resolution of disputes arising under this Agreement in an expedient manner by mutual cooperation and
without resort to litigation. To accomplish this objective, the Parties agree to follow the procedures set forth in this
Article 14 to resolve any controversy or claim arising out of, relating to or in connection with any provision of this
Agreement, if and when a dispute arises under this Agreement.
14.2 Amicable Resolution. In the event of a dispute arising hereunder, other than a dispute referred to the
Executive Officers pursuant to Section 2.5(b) (for which the procedure set forth in Section 2.5(b) shall apply), in the
first place the Executive Officers of the Parties shall meet and try to amicably resolve the issue within [***] ([***])
days (or any longer period of time agreed by the Executive Officers) from such dispute being referred to them.
14.3 Binding Arbitration. If the Executive Officers of the Parties are unable to resolve a given dispute in
accordance with the timelines set forth in Section 14.2, except for the non-arbitrable disputes set forth in
Section 14.4, either Party may have the given dispute settled by binding arbitration administered by the International
Chamber of Commerce (“ICC”) and judgment on the arbitration award may be entered in any court having
jurisdiction thereof. The Parties agree that:
(a) The place of arbitration will be [***] and all proceedings and communications will be in
English.
(b) The ICC Rules of Arbitration (“ICC Rules”) shall apply to the dispute, which rules are
deemed incorporated by reference into this clause, provided that (i) the Emergency Arbitrator Rules of the ICC
effective as of January 2012 and the ICC Rules on expedited procedure effective as of March 1, 2017 shall not apply
and (ii) in the event that the ICC Rules conflict with the provisions of this Section 14.3, the provisions of this
Section 14.3 shall prevail.
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(c) The dispute shall be settled by three arbitrators nominated in accordance with the Arbitration
Rules of the ICC, unless the Parties agree on one arbitrator.
(d) Either Party may apply to the arbitrators for interim injunctive relief until the arbitration award
is rendered or the controversy is otherwise resolved. Either Party also may, without waiving any remedy under this
Agreement, seek from any court having jurisdiction any injunctive or provisional relief necessary to protect the rights
or property of that Party pending the arbitration award. The arbitrators will have no authority to award punitive or
any other type of damages not measured by a Party’s compensatory damage. Except to the extent necessary to
confirm an award or as may be required by applicable Laws, neither Party nor any arbitrator may disclose the
existence, content, or results of an arbitration without the prior written consent of both Parties. In no event will
arbitration be initiated after the date when commencement of a legal or equitable proceeding based on the dispute,
controversy or claim would be barred by the applicable statute of limitations.
14.4 Non-Arbitrable Disputes.
(a) Any dispute with respect to which a Party has final decision-making authority pursuant to
Section 2.5(b) or other provisions of this Agreement, and any Determination Dispute, will not be subject to
resolution by binding arbitration under Section 14.3.
(b) Any dispute between the Parties to the extent relating to [***], will not be subject to resolution
by binding arbitration under Section 14.3 and instead will be resolved in a court or governmental agency of
competent jurisdiction, which, to the extent there is no exclusive jurisdiction or exclusive decision-making authority
of an agency, shall be the courts located in [***].
15. CONSEQUENCES OF CHANGE OF CONTROL
15.1 Change of Control prior to [***].
(a) In the event of a Change of Control of Clovis that occurs prior to [***], if the Applicable CoC
Party fails within [***] from the Change of Control Closing to: (i) [***]; or (ii) if applicable [***], then in either
case 3BP will have the right to terminate this Agreement in full upon [***] ([***]) days written notice to the
Applicable CoC Party, and the effects of termination set forth in Sections 11.7(a)(i), 11.7(b)(ii), 11.7(b)(iv) and
11.7(c) to 11.7(f) will apply.
(b) In the event of a Change of Control of Clovis that occurs prior to [***], unless 3BP exercises
the right to terminate this Agreement pursuant to Section 15.1(a) above within [***] from such termination right
arising pursuant to Section 15.1(a) above, then the Milestone Payments set forth in Section 8.5 tied to: (i) [***]; and
(ii) [***], will in each case, become due upon the [***] of: (A) [***]; and (B) [***].
15.2 Change of Control after [***].
(a) In the event of a Change of Control of Clovis that occurs after the [***], if the royalty
payments made to 3BP pursuant to Section 8.7 during the first [***] ([***]) consecutive months following the
Change of Control Closing do not total [***] Dollars ($[***]), then 3BP will be entitled to an additional payment in
the amount equal to [***]
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Dollars ($[***]) less the amount of royalties actually paid to 3BP on Net Sales during such [***] period. Thereafter,
royalty payments will be based solely on the rates set forth in Section 8.7.
(b) In the event of a Change of Control of Clovis that occurs after [***], if the Applicable CoC
Party fails to, if applicable [***], within [***] from the Change of Control Closing then 3BP will have the right to
terminate this Agreement in full upon [***] ([***]) days written notice to the Applicable CoC Party which right of
termination shall be exercised by 3BP not later than [***] ([***]) days following [***], and the effects of
termination set forth in Sections 11.7(a)(i), 11.7(b)(ii), 11.7(b)(iv) and 11.7(c) to 11.7(f) will apply.
16. MISCELLANEOUS
16.1 Entire Agreement; Amendments. This Agreement, including all Exhibits attached hereto as well
any Supply Agreement, Quality Agreement, and Safety Data Exchange Agreement when entered into, sets forth the
complete, final and exclusive agreement and all the covenants, promises, agreements, warranties, representations,
conditions and understandings between the Parties hereto with respect to the subject matter hereof, and supersedes all
prior agreements and understandings between the Parties with respect to the subject matter hereof. There are no
covenants, promises, agreements, warranties, representations, conditions or understandings, either oral or written,
between the Parties other than as are set forth in this Agreement. No subsequent alteration, amendment, change or
addition to this Agreement will be binding upon the Parties unless reduced to writing and signed by an authorized
officer of each Party.
16.2 Force Majeure. Each Party will be excused from the performance of its obligations under this
Agreement to the extent that such performance is prevented by force majeure (as defined below) and the
nonperforming Party promptly provides notice of the prevention to the other Party. Such excuse will be continued so
long as the condition constituting force majeure continues and the nonperforming Party takes reasonable efforts to
remove the condition. For purposes of this Agreement, “force majeure” will mean conditions beyond the control of
the Parties and occurring without the respective Party’s negligence or intent, including an act of God, war, civil
commotion, labor strike or lock-out, epidemic, failure or default of public utilities, destruction of production facilities
or materials by earthquake, storm or like uncontrollable catastrophe. In the event that the force majeure event
continues for more than six (6) months, the Party not affected by force majeure shall have the right to terminate this
Agreement.
16.3 Notices. Any notices given under this Agreement will be in writing, addressed to the Parties at the
following addresses, and delivered by person, by facsimile (with receipt confirmation), or by FedEx or other
reputable courier service. Any such notice will be deemed to have been given: (a) as of the day of personal delivery;
(b) one (1) day after the date sent by facsimile service; or (c) on the day of successful delivery to the other Party
confirmed by the courier service. Unless otherwise specified in writing, the mailing addresses of the Parties will be
as described below.
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If to 3BP:
with copy to:
If to Clovis:
with copy to:
3B Pharmaceuticals GmbH
Magnusstr. 11
D-12489 Berlin
Germany
Attention: Managing Director
FAX: +49(0)30 63 92 43 14
3B Pharmaceuticals GmbH
Magnusstr. 11
D-12489 Berlin
Germany
Attention: Head of Nuclear Medicine
FAX: +49(0)30 63 92 43 14
Clovis Oncology, Inc.
5500 Flatiron Parkway, Suite 100
Boulder, Colorado 80301
USA
Attention: Project Leadership
FAX: +1 303 245 0360
Clovis Oncology, Inc.
5500 Flatiron Parkway, Suite 100
Boulder, Colorado 80301
USA
Attention: Legal Department
FAX: +1 303 245 0360
16.4 Assignment. Neither Party may assign or transfer this Agreement or any rights or obligations
hereunder without the prior written consent of the other, except that (a) each Party may make such an assignment
without the other Party’s consent to an Affiliate of the assigning Party; and (b) each Party may assign this Agreement
without the other Party’s consent in the event of a Change of Control (subject, in the case of Clovis, to Article 15).
The Parties agree that this Agreement is of the type described in Section 365(c)(1) of the United States Bankruptcy
Code, and neither the Agreement nor any of the rights under the Agreement may be assumed or assigned in any
bankruptcy proceeding (or otherwise) without the express prior written consent of the other Party. Further, nothing
in this Agreement alone shall be considered consent by 3BP to the assumption or assignment of this Agreement by
Clovis, a trustee, a debtor, a debtor-in-possession or any other person or entity in any bankruptcy proceeding
involving Clovis. Any successor or assignee of rights and/or obligations permitted hereunder will, in writing to the
other Party, expressly assume performance of such rights and/or obligations. Any permitted assignment will be
binding on the successors of the assigning Party. Any assignment or attempted assignment by either Party in
violation of the terms of this Section 16.4 will be null, void and of no legal effect.
16.5 Performance by Affiliates. Each Party may discharge any obligations and exercise any right
hereunder through any of its Affiliates. Notwithstanding the foregoing, prior to the sale by Clovis of any Affiliate
that holds a Marketing Authorization for a Product (other than as part of a Change of Control of Clovis), Clovis will
require the assignment or transfer of such Marketing Authorization back to Clovis. Each Party hereby guarantees the
performance
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by its Affiliates of such Party’s obligations under this Agreement, and will cause its Affiliates to comply with the
provisions of this Agreement in connection with such performance. Any breach by a Party’s Affiliate of any of such
Party’s obligations under this Agreement will be deemed a breach by such Party, and the other Party may proceed
directly against such Party without any obligation to first proceed against such Party’s Affiliate. For the avoidance of
doubt, the discharge through Affiliates shall leave unaffected the contracting entities hereunder and shall solely be a
subcontracting.
16.6 Further Actions. Each Party agrees to execute, acknowledge and deliver such further instruments,
and to do all such other acts, as may be necessary or appropriate in order to carry out the purposes and intent of this
Agreement.
16.7 Severability. If any of the provisions of this Agreement are held to be invalid or unenforceable by
any court of competent jurisdiction from which no appeal can be or is taken, the provision will be considered severed
from this Agreement and will not serve to invalidate any remaining provisions hereof. The Parties will make a good
faith effort to replace any invalid or unenforceable provision with a valid and enforceable one such that the
objectives contemplated by the Parties when entering this Agreement may be realized.
16.8 No Waiver. Any delay in enforcing a Party’s rights under this Agreement or any waiver as to a
particular default or other matter will not constitute a waiver of such Party’s rights to the future enforcement of its
rights under this Agreement, excepting only as to an express written and signed waiver as to a particular matter for a
particular period of time.
16.9 Independent Contractors. Each Party will act solely as an independent contractor, and nothing in
this Agreement will be construed to give either Party the power or authority to act for, bind, or commit the other
Party in any way. Nothing herein will be construed to create the relationship of partners, principal and agent, or
joint-venture partners between the Parties.
16.10 Governing Law. The construction of this Agreement as well as resolution of all disputes,
controversies or claims arising out of, relating to or in connection with this Agreement or the performance,
enforcement, breach or termination of this Agreement and any remedies relating thereto, will be governed by and
construed under the substantive laws of [***], without regard to conflicts of law rules.
16.11 Construction of this Agreement. Except where the context otherwise requires, wherever used, the
use of any gender will be applicable to all genders, and the word “or” is used in the inclusive sense. When used in
this Agreement, “including” means “including without limitation”. References to either Party include the
successors and permitted assigns of that Party. The headings of this Agreement are for convenience of reference
only and in no way define, describe, extend or limit the scope or intent of this Agreement or the intent of any
provision contained in this Agreement. The Parties have each consulted counsel of their choice regarding this
Agreement and have jointly prepared this Agreement, and, accordingly, no provisions of this Agreement will be
construed against either Party on the basis that the Party drafted this Agreement or any provision thereof. If the
terms of this Agreement conflict with the terms of any Exhibit, then the terms of this Agreement will govern. The
official text of this Agreement and any Exhibits hereto, any notice given or accounts or statements required by this
Agreement, and any dispute proceeding related to or arising hereunder, will be in English. In the event of any
dispute concerning the construction or meaning of this Agreement, reference
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will be made only to this Agreement as written in English and not to any other translation into any other language.
16.12 Counterparts. This Agreement may be executed in two (2) or more counterparts, each of which will
be an original and all of which will constitute together the same document. Counterparts may be signed and
delivered by facsimile, or electronically in PDF format, each of which will be binding when sent.
[Signature page follows.]
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IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed by their respective duly
authorized officers as of the Effective Date.
CLOVIS ONCOLOGY, INC.
3B PHARMACEUTICALS GMBH
By:
Name:
Title:
Exhibits
By:
Name:
Title:
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[***]
Exhibit 1.3
3BP Patents
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Exhibit 1.10
Backup Candidate
[***]
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FTE Rate is fixed at a rate of [***] Euro (€[***]) per FTE per Calendar Year.
Exhibit 1.54
FTE Rate
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Exhibit 1.69
Lead Candidate
[***]
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Exhibit 3.2(a)
[***]
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Exhibit 11.3(b)
Determination Dispute Resolution
Disputes regarding a determination by the board of directors of Clovis that [***] will be resolved in the following
manner:
1. Appointment of Expert. Within [***] ([***])] Business Days after 3BP requests under Section 11.3 that an
expert be appointed to resolve a Determination Dispute, the Parties will jointly appoint a mutually acceptable expert
with experience and expertise in the subject matter of the dispute. If the Parties are unable to so agree within the
[***] ([***])] Business Day period, or if there is a disclosure of a conflict by an expert under Paragraph 2 hereof that
results in the Parties not confirming the appointment of the expert, then an expert (willing to act in that capacity
hereunder) will be appointed by an experienced arbitrator on the roster of the International Chamber of Commerce
(“ICC”).
2. Conflicts of Interest. Any person appointed as an expert will be entitled to act and continue to act as an
expert even if at the time of the appointment or at any time before the expert gives a determination on the
Determination Dispute, the expert has or may have some interest or duty which conflicts or may conflict with the
appointment; provided that before accepting the appointment (or as soon as practicable after the expert becomes
aware of the conflict or potential conflict), the expert fully discloses the interest or duty and the Parties will, after the
disclosure, have confirmed the expert’s appointment.
3. Not Arbitrator. No expert will be deemed to be an arbitrator and the provisions of any Applicable Law
relating to arbitration will not apply to the expert or the expert’s determination or the procedure by which the expert
reaches his determination under this Exhibit 11.3.
4. Condition and Procedure.
(a) Condition for Appointment. The expert will be appointed on condition that he/she undertakes that:
(i) the expert promptly fixes a reasonable time and place for receiving representations, submissions or information
from the Parties for the proper conduct of the expert’s determination and any hearing; and (ii) the expert renders a
decision (with full reasons) within [***] ([***]) Business Days (or another date as the Parties and the expert may
agree) after receipt of all information requested by the expert under Paragraph 4(c) hereof.
(b) Procedure: Upon its appointment, the Parties shall ensure that the expert follows the procedure set
forth under subclause (a) above.
(c) Disclosure of Evidence. The Parties undertake to give to the expert all the evidence and information
within their respective possession or control as the expert may reasonably consider necessary for determining the
Determination Dispute, and they will disclose promptly and in any event within [***] ([***])] Business Days of a
written request from the expert to do so. The Parties will co-operate and seek to narrow and limit the issues to be
determined.
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(d) Advisors. Each Party may appoint any counsel, consultants and advisors as it feels appropriate to
assist the expert in making a determination and to present their respective cases.
(e) Final and Binding. The determination of the expert will, except for fraud or manifest error, be final
and binding upon the Parties.
(f) Costs. Each Party will bear its own costs for any matter referred to an expert hereunder and, in the
absence of express provision in the Agreement to the contrary, the costs and expenses of the expert will be shared
equally by the Parties.
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[***]
Exhibit 12.2(a)
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Exhibit 23.1
Consent of Independent Registered Public Accounting Firm
We consent to the incorporation by reference in the following Registration Statements:
(1) Registration Statements (Form S-3 No. 333-251120) of Clovis Oncology, Inc., and
(2) Registration Statements (Form S-8 Nos. 333-234600, 333-219046, 333-211948, 333-178283, 333-182278, 333-190565, 333-
198022, 333-206193, 333-226523 and 333-238936) pertaining to the 2009 Equity Incentive Plan, 2011 Stock Incentive Plan,
2020 Stock Incentive Plan and 2011 Employee Stock Purchase Plan of Clovis Oncology, Inc.;
of our reports dated February 24, 2021, with respect to the consolidated financial statements of Clovis Oncology, Inc., and the
effectiveness of internal control over financial reporting of Clovis Oncology, Inc., included in this Annual Report (Form 10-K) of
Clovis Oncology, Inc. for the year ended December 31, 2020.
/s/ Ernst & Young LLP
Denver, Colorado
February 24, 2021
I, Patrick J. Mahaffy, certify that:
Exhibit 31.1
1.
2.
3.
4.
I have reviewed this annual report on Form 10-K of Clovis Oncology, Inc. for the year ended December 31, 2020;
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present
in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the
periods presented in this report;
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as
defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a.
b.
c.
d.
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be
designed under our supervision, to ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in
which this report is being prepared;
Designed such internal control over financial reporting, or caused such internal control over financial reporting to
be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance with generally accepted
accounting principles;
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered
by this report based on such evaluation; and
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during
the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that
has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial
reporting; and
5.
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control
over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or
persons performing the equivalent functions):
a.
b.
All significant deficiencies and material weaknesses in the design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and
report financial information; and
Any fraud, whether or not material, that involves management or other employees who have a significant role in
the registrant’s internal control over financial reporting.
Date: February 24, 2021
/s/ PATRICK J. MAHAFFY
Patrick J. Mahaffy
President and Chief Executive Officer
I, Daniel W. Muehl, certify that:
Exhibit 31.2
1.
2.
3.
4.
I have reviewed this annual report on Form 10-K of Clovis Oncology, Inc. for the year ended December 31, 2020;
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present
in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the
periods presented in this report;
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as
defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a.
b.
c.
d.
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be
designed under our supervision, to ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in
which this report is being prepared;
Designed such internal control over financial reporting, or caused such internal control over financial reporting to
be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance with generally accepted
accounting principles;
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered
by this report based on such evaluation; and
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during
the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that
has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial
reporting; and
5.
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control
over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or
persons performing the equivalent functions):
a.
b.
All significant deficiencies and material weaknesses in the design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and
report financial information; and
Any fraud, whether or not material, that involves management or other employees who have a significant role in
the registrant’s internal control over financial reporting.
Date: February 24, 2021
/s/ DANIEL W. MUEHL
Daniel W. Muehl
Executive Vice President and Chief Finance Officer
CERTIFICATIONS PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
(18 U.S.C. SECTION 1350)
Exhibit 32.1
In connection with the Annual Report of Clovis Oncology, Inc., a Delaware corporation (the “Company”), on Form 10-K for the
year ended December 31, 2020, as filed with the Securities and Exchange Commission (the “Report”), Patrick J. Mahaffy, as
President and Chief Executive Officer of the Company, does hereby certify, pursuant to §906 of the Sarbanes-Oxley Act of 2002
(18 U.S.C. §1350), that to his knowledge:
(1)
The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)
The information contained in the Report fairly presents, in all material respects, the financial condition and results of
operations of the Company.
Date: February 24, 2021
/s/ PATRICK J. MAHAFFY
Patrick J. Mahaffy
President and Chief Executive Officer
CERTIFICATIONS PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
(18 U.S.C. SECTION 1350)
Exhibit 32.2
In connection with the Annual Report of Clovis Oncology, Inc., a Delaware corporation (the “Company”), on Form 10-K for the
year ended December 31, 2020, as filed with the Securities and Exchange Commission (the “Report”), Daniel W. Muehl, as
Executive Vice President and Chief Finance Officer of the Company, does hereby certify, pursuant to §906 of the Sarbanes-
Oxley Act of 2002 (18 U.S.C. §1350), that to his knowledge:
(1)
The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)
The information contained in the Report fairly presents, in all material respects, the financial condition and results of
operations of the Company.
Date: February 24, 2021
/s/ DANIEL W. MUEHL
Daniel W. Muehl
Executive Vice President and Chief Finance Officer