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Clovis Sinks on Lack of Buyer Interest

Zacks Equity Research

Shares of Clovis Oncology, Inc. (CLVS) plummeted more than 11% to $64.99 on Sep 25, 2013 following a report from Bloomberg News that the biopharmaceutical company was unsuccessful in finding a buyer. A person familiar with the situation, who declined to be identified, said that following its futile attempt in attracting a buyer, Clovis was considering other options.

According to an earlier report from Bloomberg News, Clovis was exploring strategic options including a potential sale after positive results from its early stage oncology candidates caused its stock price to soar.

We remind investors that on Jun 3, 2013, Clovis presented encouraging data from two early-stage studies on its candidates rucaparib (ovarian cancer) and CO-1686 (lung cancer). The study on rucaparib, which evaluated the drug as a monotherapy, indicated a disease control rate of 89% in heavily-pretreated patients suffering from ovarian cancer. Moreover, the candidate was well tolerated in the study.

The study on CO-1686 provided no evidence of wild-type epidermal growth factor receptor (:EGFR) inhibition in heavily pretreated lung cancer patients. The candidate too was well tolerated. The EGFR mutant patients were resistant to the previous treatments. Though encouraged by the positive results, we note that the candidates are in early-stages of development and quite a distance away from entering the market, if at all.

The other candidates at Clovis, which has no marketed product, too are in early-stages of development. The early-stage nature of the biopharmaceutical company’s pipeline makes it a risky buyout target. Moreover, Clovis’ expensive valuation was also instrumental in no one coming forward to acquire it according to reports. On a price-to-book basis, the shares of Clovis are trading at 5.3x, a huge premium to the S&P 500 average of 2.8x.

Clovis currently carries a Zacks Rank #3 (Hold). Stocks such as Roche (RHHBY), Eli Lilly and Company (LLY) and Bayer (BAYRY) appear to be more attractive.  Roche carries a Zacks Rank #1 (Strong Buy) while Bayer and Eli Lilly carry Zacks Rank #2 (Buy).

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