Is It Too Late to Buy Clovis Oncology Stock?

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In April, I listed Clovis Oncology (NASDAQ: CLVS) as a cancer drug stock that could make you rich. In the two and a half months since then, the biotech stock is up around 65%. That's a pretty good start to becoming rich.

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Clovis' big gain stemmed from the company's announcement on June 26 of overwhelmingly positive results from a late-stage confirmatory study of Rubraca in treating ovarian cancer. Now that this catalyst has come and gone, though, is it too late to buy Clovis Oncology stock?

Dissecting those results

To determine the potential for Clovis Oncology's share price to move higher, it's important to understand the significance of the late-stage results announced last week. Rubraca won U.S. Food and Drug Administration (FDA) accelerated approval as a third-line treatment of ovarian cancer in December. The FDA's accelerated approval process allows "earlier approval of drugs that treat serious conditions, and that fill an unmet medical need based on a surrogate endpoint." Surrogate endpoints can predict clinical benefit but aren't measures of clinical benefit themselves.

The study results announced last week demonstrate clear clinical benefit for Rubraca. Progression-free survival (PFS) improved in patients taking the drug in all three populations studies. The greatest benefit was found in ovarian cancer patients with germline or somatic BRCA mutation. The median PFS for patients in this group who were treated with rucaparib was 16.6 months compared to only 5.4 months for those who received placebo. 

But this study does more than merely cement Clovis' prior approval for Rubraca as a third-line treatment for ovarian cancer. The results were so strong that the biotech plans to submit for FDA approval for a second-line and later maintenance treatment indication. 

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If approved for this additional indication, it sets Clovis up to compete even more directly against Tesaro (NASDAQ: TSRO). In March, Tesaro won FDA approval for Zejula as a maintenance therapy for ovarian cancer patients who have received one or more chemotherapies.   

Other indications

Clovis could eventually go head-to-head with Tesaro and Astrazeneca (NYSE: AZN) in treating first-line ovarian cancer. The biotech's ARIEL4 clinical study is evaluating Rubraca versus chemotherapy in treating the disease. Meanwhile, Tesaro has a late-stage study underway for Zejula as a first-line treatment of ovarian cancer. AstraZeneca is similarly evaluating Lympaza for the first-line indication. 

Ovarian cancer isn't the only target Clovis has in mind for Rubraca, though. The biotech started a late-stage study in progress evaluating the drug in treating prostate cancer earlier this year. Clovis also has several phase 2 studies of Rubraca underway focusing on breast cancer and gastroesophageal cancer.

In addition, Rubraca holds potential as part of a combination therapy. Roche (NASDAQOTH: RHHBY) is conducting an early stage study exploring a combination of its Tecentriq and Rubraca in treating solid tumors and advanced gynecologic cancers (particularly ovarian cancer).

Better late than never?

Rubraca could hit peak annual sales of up to $1 billion in the ovarian cancer indication. If the drug ultimately wins approval for other indications, that figure is likely to go higher.

These projections are promising. Consider, though, that Clovis Oncology's market cap already stands above $4.5 billion thanks to the stock's recent surge. Clovis is already trading at a price-to-sales ratio higher than some established biotechs -- but based on sales estimates that have yet to materialize.

On the other hand, Clovis is one of several biotechs that larger companies could view as prime acquisition targets. If corporate tax reforms allow drugmakers to bring money parked overseas back into the U.S. at a low tax rate, it would't be surprising to see Clovis become the subject of a bidding war in 2018. There could be activity on the acquisition front even sooner than that.

Is it too late to buy Clovis Oncology stock? I think investors would have been in much better shape to have done so prior to the latest news. I wouldn't look for more gains of the level seen in the last week, but Clovis probably hasn't peaked just yet. 

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Keith Speights has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.