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Edited Transcript of CLVS earnings conference call or presentation 24-Feb-20 9:30pm GMT

Q4 2019 Clovis Oncology Inc Earnings Call

Boulder Feb 27, 2020 (Thomson StreetEvents) -- Edited Transcript of Clovis Oncology Inc earnings conference call or presentation Monday, February 24, 2020 at 9:30:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Anna Sussman

Clovis Oncology, Inc. - VP of IR

* Daniel W. Muehl

Clovis Oncology, Inc. - Executive VP & CFO

* Patrick J. Mahaffy

Clovis Oncology, Inc. - Co-Founder, CEO, President & Executive Director

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Conference Call Participants

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* Andrew Scott Berens

SVB Leerink LLC, Research Division - MD of Targeted Oncology & Senior Research Analyst

* Edward Patrick White

H.C. Wainwright & Co, LLC, Research Division - MD of Equity Research & Senior Healthcare Analyst

* Huidong Wang

Barclays Bank PLC, Research Division - Research Analyst

* Kennen B. MacKay

RBC Capital Markets, Research Division - MD & Co-Head of US Biotechnology Research

* Kyuwon Choi

Goldman Sachs Group Inc., Research Division - Equity Analyst

* Michael Werner Schmidt

Guggenheim Securities, LLC, Research Division - Senior Analyst & Senior MD

* Tazeen Ahmad

BofA Merrill Lynch, Research Division - VP

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Presentation

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Operator [1]

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Ladies and gentlemen, thank you for standing by and welcome to the Clovis Oncology Fourth Quarter and Full Year 2019 Conference Call. (Operator Instructions)

I would now like to hand the conference over to your speaker today, Anna Sussman, VP of Investor Relations. Thank you. Please go ahead.

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Anna Sussman, Clovis Oncology, Inc. - VP of IR [2]

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Thank you, Mike. Good afternoon, everyone, and welcome to the Clovis Oncology fourth quarter and fiscal year 2019 conference call. Thank you for joining us. You have likely seen this afternoon's news release. If not, it's available on our website at clovisoncology.com. As a reminder, this conference call is being recorded and webcast. Remarks may be accessed live on our website during the call and will be available in our archive for the next several weeks.

Today's agenda includes the following: Patrick Mahaffy, our President and CEO, will discuss the key components and highlights of today's corporate update; and Dan Muehl, Clovis' Chief Financial Officer, will cover the quarter and year's financial results in greater detail. Pat will make a few closing remarks, and then we'll open the call for Q&A, during which time Lindsey Rolfe, our Chief Medical Officer, will also be available to answer questions.

Before we begin, please note that during today's conference call, we may make forward-looking statements within the meaning of the federal securities laws, including statements concerning our financial outlook and expected business plans. All these statements are subject to risks and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. Please refer to our recent filings with the SEC for a full review of the risks and uncertainties associated with our business. Forward-looking statements speak only as of the date on which they are made, and Clovis undertakes no obligation to update or revise any forward-looking statements.

Now I'll turn the call over to Pat Mahaffy.

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Patrick J. Mahaffy, Clovis Oncology, Inc. - Co-Founder, CEO, President & Executive Director [3]

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Thanks, Anna. Welcome, everybody. We appreciate your time today. I'll begin with a commercial update for Rubraca. I'm pleased to report that our global net revenue for the fourth quarter of 2019 was $39.3 million, up 5% sequentially from Q3 2019 and up 30% over Q4 2018. This sequential quarter growth was driven primarily by increased revenue in Germany and launches in England and Italy during the fourth quarter.

For the full year 2019, global net revenue was $143 million, up 50% from 2018. The year-over-year growth for the quarter and the year was driven largely by growth in U.S. sales, including overall growth in total volume and better management of the patient assistance program, offset to some extent by higher gross to net adjustments.

We've seen stepwise growth over the last several quarters, including the 12% increase in U.S. sales from Q2 2019 to Q3 2019 and are pleased that we have maintained this higher level of sales in Q4 2019.

Our key near-term objectives remain the same. Grow U.S. ovarian cancer revenues by increasing market share in, and overall adoption of the maintenance treatment indication in the recurrent ovarian cancer setting; increase European revenues through Rubraca ovarian cancer launches in England, Italy, France and Spain, along with driving continued revenue growth in Germany. I should note that the adoption of maintenance treatment in ovarian cancer in Europe is similar to that of the U.S., and we and our competitors are making considerable efforts to overcome observation or watch and wait as the standard approach to treating recurrent ovarian cancer; and hopefully, on or before our PDUFA date of May 15, begin to grow revenue through with the addition of the potential new indication in the U.S. for the treatment of BRCA1/2 mutant recurrent, metastatic, castrate-resistant prostate cancer or mCRPC. And that brings us to our most near-term development and regulatory program in this setting.

In November 2019, we submitted our planned supplemental new drug application, or sNDA, for Rubraca as a monotherapy treatment of adult patients with BRCA1/2 mutant-recurrent, metastatic CRPC. The filing was based on data from the TRITON2 clinical program in advanced prostate cancer. In January 2020, we announced that the FDA accepted our sNDA for Rubraca and granted priority review status to the application with the PDUFA date of May 15, 2020. We're actively preparing for Rubraca launch in prostate cancer in the U.S., which we will commence upon receipt of FDA approval.

We think that Rubraca represents an important hormone-free and chemotherapy-free option for our targeted population of men in the U.S. who have metastatic CRPC, approximately 12% of whom have a mutation of BRCA. We've been encouraged by our interactions with both the medical community and to a lesser extent, the urology community about the potential of Rubraca to address the unmet medical need in recurrent CRPC. We are actively engaged in launch preparations, including sales force training, and we will be ready to launch on approval, which we expect to occur on or before May 15.

Now I'll briefly discuss the latest updates to our clinical pipeline for Rubraca. During the fourth quarter, we initiated the LODESTAR study, our Phase II pan-tumor study to evaluate Rubraca in homologous recombination repair genes across tumor types. The study will evaluate Rubraca in patients with recurrent solid tumors associated with the deleterious homologous recombination repair or HRR gene mutations. Based on our interactions with FDA, the study may be registration-enabling for a targeted gene and tumor-agnostic label, if data from the trial support an accelerated approval.

Next, I'd like to briefly highlight our combination studies with BMS for both Rubraca and lucitanib, and then I'll discuss our newest compound, FAP-2286. We remain enthusiastic about our ongoing clinical collaboration with Bristol-Myers Squibb. I'll take a moment to review certain of our combination studies for both Rubraca and lucitanib with nivolumab. I'll begin with the Rubraca combination. FRACTION-GC is a BMS-sponsored, multi-arm Phase II study evaluating the combinations of each of Opdivo and Yervoy with Rubraca as well as Opdivo, Yervoy and Rubraca in combination for the treatment of advanced gastric cancer. This is the first sponsored study to explore this triplet combination and it is now enrolling patients into the safety lead-in portion of the study.

The Clovis sponsored Phase III ATHENA trial in first-line maintenance for advanced ovarian cancer continues to enroll well, and we anticipate completing enrollment in this 1,000 patient study in the second quarter of 2020. With ATHENA, we believe we are uniquely positioned to evaluate Rubraca in terms of 2 outcomes: as monotherapy versus placebo in the first-line maintenance setting in the HRD population, inclusive of BRCA and in the all-comers or intent-to-treat population as well as any potential advantage of the combination of Rubraca and Opdivo in the same patient populations. ATHENA is the first frontline switch maintenance study designed to show both PARP monotherapy and PARP/PD-1 combination therapy in one study design.

I'll take a moment to review the analysis plan for ATHENA. First, expected in the second half of 2021, we will see the results of Rubraca monotherapy versus placebo in all study populations and then probably a year or more later, we will see the results of Rubraca plus Opdivo versus Rubraca in all study populations. In each of these analyses, we will first evaluate outcomes in the HRD population, including BRCA, and then step down to the entire intent-to-treat population.

To wrap up Rubraca and move to lucitanib, I'll note that SEASTAR, our Clovis-sponsored Phase Ib/II study that includes multiple single-arm Rubraca combination studies, including the combination of Rubraca with lucitanib in ovarian cancer, is currently enrolling the dose-finding Phase Ib portion of the study. Lucitanib, of course, is our investigational inhibitor tyrosine kinases including vascular endothelial growth factor receptors 1 through 3, platelet-derived growth factor receptors alpha and beta and fibroblast growth factor receptors 1 through 3.

As we have discussed on prior calls, there are very encouraging data in studies of a drug similar to lucitanib, which inhibits the same 3 pathways when combined with the PD-1 inhibitor. This provides us a compelling clinical rationale for the development of lucitanib in combination with the PD-1. We believe the combination of lucitanib with the PD-1 targeting monoclonal antibody represents a large potential opportunity in multiple solid tumor types.

Angiogenesis has been shown to be immunosuppressive within the tumor microenvironment, dampening antitumor immune responses. Preclinical data demonstrates that the anti-tumor activity of the PD-1 inhibitor is enhanced through the inhibition of angiogenesis by lucitanib, which targets 3 relevant proangiogenic pathways as well as simultaneously targeting tumor cell proliferation and anti-VEGFR therapy resistance driven by PDGF and FGF receptors.

In February 2019, we announced the expansion of our clinical collaboration with Bristol-Myers Squibb to include planned combinations of Opdivo with lucitanib. The Clovis-sponsored LIO-1 study is a Phase Ib/II study evaluating lucitanib in combination with Opdivo. LIO-1 is now enrolling patients with gynecological and other solid tumors. We hope to have preliminary data from this study as well as the Rubraca/lucitanib combination study at medical meetings in 2020.

In addition, the BMS-sponsored CHECKMATE 79X study is a Phase I/II study evaluating multiple combinations with Opdivo, including an arm in combination with lucitanib in patients with second-line non-small cell lung cancer. This study is expected to initiate in early 2020.

Now let me describe the newest addition to the Clovis pipeline, our peptide-targeted radiopharmaceutical therapy program and our lead compound FAP-2286. In September 2019, we announced a global licensing and collaboration agreement with 3B Pharmaceuticals, with initial focus on the peptide-targeted radionuclide therapy and imaging agent targeting fibroblast activation protein alpha, commonly referred to as FAP. FAP is highly expressed in cancer associated fibroblasts, which are found in the majority of cancer types, potentially making it a suitable target across a wide array of solid tumors. It is highly expressed in many epithelial cancers, including more than 90% of breast, lung, colorectal and pancreatic carcinomas. Clovis will conduct global clinical trials and has obtained U.S. and global rights, excluding Europe where 3BP retains rights. We are planning to submit the IND for FAP-2286 in the second half of this year.

In addition, we and 3BP are collaborating on a discovery program directed at 3 additional targets for radionuclide therapy, to which we have global rights. [We've regarded] this program for many reasons, including, of course, the opportunity to be a leader in the emerging field of targeted radiotherapy for treatment for solid tumors. In this case, we also have the opportunity to be the first to clinically develop an FAP-targeted radionuclide, and we are also enthusiastic about the targets that are the subject of our discovery collaboration.

In addition, while our initial development focus is on monotherapy, there is an evident biological rationale to combine targeted radionuclide therapy with cancer therapies, including anti-PD-1 agents as well as with Rubraca. And we intend to explore these combinations first preclinically and potentially clinically as well.

Now some of you may be familiar with the history of PSMA-targeted radionuclides, in particular, lutetium PSMA-617, which was used extensively under named patient use in Germany and certain other countries prior to the initiation of any formal clinical development programs. While we do not anticipate such extensive named patient use like that, which occurred for lutetium PSMA-617, we have had expressions of interest for named patient use from German physicians.

To this end in December 2019, Professor Dr. Richard Baum presented his initial independent clinical experience with FAP-2286 in the first named patient use of the compound in the imaging and treatment settings at the International Centers for Precision Oncology Foundation Symposium in Germany. Professor Dr. Baum's early results in patients with advanced solid tumors, including breast, pancreatic, colorectal and ovarian cancers, showed the following: images of 10 patients imaged with PET/CT with Gallium 68, FAP-2286 were completely consistent with standard of care FDG-PET/CT scans in the same patients. In patients treated with lutetium FAP-2286, there were encouraging tumor accumulation and retention and a reported lack of significant adverse effects was demonstrated within the first 2 months after the first dose.

As a reminder, named patient programs are not clinical trials and the treating physician independently makes all decisions including dose and assessment of efficacy and safety. We found this reported experience encouraging, and our focus remains on initiating a broad clinical development program for our FAP-targeted compound. We currently plan to submit an IND application for FAP-2286 in the second half of 2020, followed by a Phase I study to determine the dose and tolerability of the FAP-targeting therapeutic agent with expansion cohorts planned in multiple tumor types as part of the global development program.

Thus far, in radiotherapeutic development, physicians have used an imaging agent, mostly Gallium 68, to identify patients with the appropriate level of tumor target, which in our case would be FAP. We are exploring opportunities to generate imaging data for FAP-2286, potentially even before our IND is submitted. Not only would this information will be useful to gain additional experience with FAP-2286 and better understand the characteristics of FAP expression in multiple tumor types, but further it would allow us to collaborate with academic institutions eager to explore the potential of FAP as an imaging and treatment target.

And with that, I'll turn the call over to Dan to discuss fourth quarter and fiscal year 2019 financial results.

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Daniel W. Muehl, Clovis Oncology, Inc. - Executive VP & CFO [4]

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Thanks, Pat, and hello, everyone. We reported net product revenue for Rubraca of $39.3 million for Q4 2019, which included U.S. net product revenue of $36.1 million and ex U.S. net product revenue of $3.2 million compared to the net product revenue reported in Q4 2018 of $30.4 million all of which was in the U.S. This represents a 5% increase over Q3 2019 and a 30% increase year-over-year. U.S. net product revenues was $36.1 million for the fourth quarter, in line with the $36.5 million reported in Q3 and up 19% from the $30.4 million recorded in Q4 2018.

The supply of free drug distributed to eligible patients in the U.S. through the Rubraca patient assistance program for Q4 2019 was 18% of the overall commercial supply compared to 20% in Q3 2019. This represented $8 million in commercial value for Q4 2019 compared to $9 million in Q3 2019 and $10.4 million in Q4 2018. Ex U.S., net product revenue was $3.2 million for the fourth quarter, which represents a $2.1 million increase from the previous quarter, driven primarily by increased revenue in Germany and launches in England and Italy during the fourth quarter.

Net product revenue for 2019 was $143 million, which included $137.2 million and $5.8 million in U.S. and ex U.S. product revenues, respectively. This compares to $95.4 million in net product revenues in 2018, all from the U.S. This represents an increase of 50% year-over-year.

U.S. net product revenue was $137.2 million in 2019, up 44% from the $95.4 million reported in 2018. This was largely driven by growth in total volume and better management of the patient assistance program, offset to some extent by higher gross to net adjustments. The supply of free drug distributed to eligible patients in the U.S. through the Rubraca patient assistance program in 2019 was 20% of the overall commercial supply compared to 26% in 2018. This represented $34.8 million in commercial value for 2019 compared to $33.4 million in 2018.

Gross to net adjustments totaled 17.4% in Q4 2019 and 15% for the full year 2019 compared to 10.1% in Q4 2018 and 10.4% for the full year 2018. The increase in gross to net adjustments reflects an increase in the U.S. and the impact of growing European sales. We expect gross to net adjustments to be in the mid-teens in 2020, pending the revenue mix between U.S. and Europe.

Turning now to a discussion of cash. As of December 31, we had $296.7 million in cash, cash equivalents and available for sale securities. In August 2019, Clovis repurchased $190.3 million aggregate principal amount of its 2.5% convertible senior notes due 2021. Approximately $97.2 million aggregate principal amount of these notes remain outstanding.

In January 2020, Clovis repurchased $123.4 million aggregate principal amount of its 4.5% convertible senior notes due 2024 that were initially issued in August 2019. This transaction will save $28 million in cash on interest payments under the notes issued in 2019, and approximately $148 million aggregate principal amount of these notes remain outstanding. Additionally, the company has $300 million in aggregate principal amount outstanding of its 1.25% convertible senior notes due 2025.

And as of December 31, we had drawn approximately $35 million under the TPG ATHENA clinical trial financing and had up to $140 million available to draw under the agreement to fund expenses of the ATHENA trial through Q3 2022.

Based on the company's anticipated revenue, spending, available financing sources and existing cash, cash equivalents and available for sale securities, we believe we have sufficient cash, cash equivalents and available-for-sale securities to fund our operating plan into the second half of 2021. This does not include any cash repayment that may be required to pay off unless we refinance, the remaining $97.2 million aggregate principal amount of the 2.5% convertible notes due 2021 at their maturity in September of 2021.

Net cash used in operating activities was $70.1 million for Q4 2019 and $323.6 million for the fiscal year 2019 compared with $82.7 million for Q4 2018 and $366 million for the comparable periods in 2018. In addition, borrowings under the TPG ATHENA financing provided $13.8 million in cash in Q4 2019, reducing net cash utilized in operating activities to $56.3 million during the quarter. Net cash used in operating activities for Q4 2019 included an upfront payment of $9.4 million to 3B Pharmaceuticals related to the in-licensing of FAP-2286.

Net cash used in operating activities was $127.1 million for the second half of 2019 and $196.5 million for the first half of 2019, a reduction of $69.4 million or 35%. In addition, borrowings under the TPG ATHENA financing provided $8.6 million in the first half and $26 million in the second half of 2019, reducing net cash utilized in operating activities by $86.8 million or 46% from the first half to the second half of 2019.

We reported a net loss for Q4 of 2019 of $99.5 million or $1.81 per share and $400.4 million or a net loss of $7.43 per share for fiscal year 2019. In 2018, the net loss for the fourth quarter was $99.3 million or $1.88 per share and $368 million or a net loss of $7.07 per share for the full year. Net loss for Q4 and fiscal year 2019 included share-based compensation expense of $12.6 million and $54.3 million compared to $11.4 million and $49.1 million for the comparable periods in 2018.

Research and development expenses totaled $72.5 million for Q4 2019 and $283.1 million for the full year 2019 compared to $71.2 million and $231.3 million for the comparable periods in 2018. The increase for the full year is primarily due to higher research and development costs for Rubraca clinical trials.

Selling, general and administrative expenses totaled $45.2 million for Q4 2019 and $182.8 million for the full year 2019 compared to $49.1 million and $175.8 million for the comparable periods in 2018. Selling, general and administrative expenses increased for the full year due to commercialization activities for Rubraca including increased costs associated with building out the European commercial infrastructure.

Now I'll turn the call back to Pat.

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Patrick J. Mahaffy, Clovis Oncology, Inc. - Co-Founder, CEO, President & Executive Director [5]

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Thanks, Dan. Happy birthday. We are pleased with our progress in the fourth quarter and in 2019 in total. We demonstrated strong sales growth in 2019 with Rubraca in the second-line ovarian cancer maintenance setting. In the U.S., we remain focused on growing our share of the ovarian cancer PARP inhibitor market as well as expanding second-line maintenance PARP adoption overall. In Europe, Rubraca is now reimbursed in Germany, England, Italy, France and Spain, and during the course of 2019, we launched in Germany, England and Italy. Rubraca launched earlier this month in France and will launch shortly in Spain.

In addition to our sales progress, we also showed a significant reduction in our net cash utilized in operations, which was 60 -- or excuse me, $86.8 million or 46% lower in the second half of 2019 and in the first half of 2019, reflecting reductions in product supply costs, milestone payments, disciplined with head count additions, clinical trial management and the benefits of the TPG ATHENA financing. We submitted the supplemental NDA for Rubraca in BRCA1/2 mutant recurrent metastatic CRPC in mid-November. And we're pleased that the FDA granted priority review designation for the application and a PDUFA date of May 15, 2020. This provides the potential for a U.S. launch in a second tumor type in May of this year.

We remain enthusiastic about the potential for lucitanib with 2 Clovis-sponsored combination studies now open for enrollment: one with Rubraca in advanced ovarian cancer as part of SEASTAR as well as one in combination with Opdivo in advanced gynecological cancers and other solid tumors. We hope to have initial data from these trials at medical meetings in 2020.

And finally, we look forward to submitting the IND for FAP-2286 in the second half of 2020, and we're enthusiastic about the opportunity to develop this compound specifically and potentially up to 3 additional radionuclide therapies in this emerging field. We believe with this program, we have the opportunity to become a leader in the development of this important new treatment modality for multiple solid tumor types.

And with that, I'd be happy to answer any questions you may have.

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Questions and Answers

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Operator [1]

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(Operator Instructions) Your first question comes from Kevin MacKay (sic) [Kennen MacKay] from RBC Capital.

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Kennen B. MacKay, RBC Capital Markets, Research Division - MD & Co-Head of US Biotechnology Research [2]

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Maybe if you could talk a little bit more about some of the Rubraca dynamics in the U.S. market? It seems like maybe there was a slight volume decline after backing up the gross to net and free drug impact, but would love if you could maybe help contextualize that market and again, the dynamics going on there a little bit more.

And then a follow-up on lucitanib. We saw some very impressive VEGF plus checkpoint data in prostate cancer from the COSMIC trial at ASCO GU. I was wondering if -- how you were thinking about targeting prostate center with lucitanib if there are any plans there with the thinking that maybe it would just be a far and less competitive field than the more validated RCC space?

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Patrick J. Mahaffy, Clovis Oncology, Inc. - Co-Founder, CEO, President & Executive Director [3]

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Yes. So first dynamic in the market, we actually did see a volume increase in Q4, it was modest, but we did see a volume increase. We were affected by the higher gross to net, which reflects some contracting, we, as other companies have done in the space. The thing I'll also point to is that while we don't have a good perfect data set from olaparib. It does appear that sales, for instance, for ZEJULA were also flat to down in Q4 compared to Q3. It could just be a dynamic of the quarter.

I also think it's important to note, as I said in my prepared remarks, we saw a 13% increase in Q3 compared to Q2, and we maintained that increase in Q4. And I think that it's important as you look back at our reported sales that our growth hasn't really occurred on a linear quarterly basis. What we've seen is $32 million and $32 million and then jumped to $36 million, and now we're $36 million, and hopefully, we'll see another jump beginning in some quarter in 2020.

So I think that we had held our own in this market. We still need with our competitors to do everything we can to grow adoption of second-line maintenance, so that we can really not only take more share, but benefit from kind of a rising tide lifting all boats, a better adoption, and so that will remain a focus of ours in 2020.

As to the data for a VEGF inhibitor plus a PD-L1 that were presented at ASCO GU, obviously, we've paid attention to that, too. We think it's worth further exploration for us potentially with the PD-1, potentially if that was of interest to Bristol, but we -- it's early days to figure out what the next step for us would be. But we, like you, were impressed with the data and see an evident opportunity for the combination of the VEGFs for a pan-angiogenesis compound like lucitanib with a PD-1.

One thing you said, Kennen, I just want to address, as you said, rather than go into the very crowded RCC space, that has not been our priority. Our priority have been these kind of [ecological] cancers and some other solid tumor indications where we have precedent data for Keytruda with pembro, but it is not a subject of our study activities now to pursue RCC.

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Operator [4]

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Your next question comes from Michael Schmidt from Guggenheim.

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Michael Werner Schmidt, Guggenheim Securities, LLC, Research Division - Senior Analyst & Senior MD [5]

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I had a couple around prostate cancer. First of all, congrats on the PDUFA date, the acceptance and then the PDUFA date, obviously. Just wondering how you think about the competitive dynamics in BRCA-positive prostate cancer longer term with other companies, obviously, having started additional trials in earlier lines of therapy in mCRPC. And just wondering how you think about maybe the initial market dynamics and longer term the potential for Rubraca in prostate cancer?

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Patrick J. Mahaffy, Clovis Oncology, Inc. - Co-Founder, CEO, President & Executive Director [6]

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Yes. So we think for now and for a reasonable future, the PARP inhibitor approvals will be limited to us and to olaparib. Each of the other competitors running a single-arm study are reasonably behind based on the enrollment rates that they showed mostly recently at ASCO GU, which was only a couple of weeks ago. So that's pretty up-to-date data. So we -- like anybody, we'd love to be alone, but we're confident that we have a good chance of being first or tied for first based on AZ's announcement of their timing, and obviously, ahead of any other competitors. So 2 is better than 3, which is what we base in ovarian right now.

With regard to earlier line opportunities in prostate, the exploration being done by some others has recently started studies combining their PARP inhibitors with, for instance, abiraterone or enzalutamide. We will start a combination study with enzalutamide before the end of this year in collaboration with a number of investigators, we're already effectively signed up for this. So I think that in the event there is an opportunity to combine a PARP inhibitor with an enzalutamide or an abiraterone or one of the next gen products, we will be competitive in that space in a reasonably similar time frame to the other trials that are seeking the same indication.

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Michael Werner Schmidt, Guggenheim Securities, LLC, Research Division - Senior Analyst & Senior MD [7]

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Understood. Great. And then on lucitanib, I think you did mention initial data presentation sometime this year. Just wondering if you could help us understand a little bit more which of the trials and what indications and how many patients worth of data should be expected here by investors?

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Patrick J. Mahaffy, Clovis Oncology, Inc. - Co-Founder, CEO, President & Executive Director [8]

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Yes. We'll submit to a number of meetings. The one, I think we'll probably that always seems to work to the Clovis calendar, I don't know why. But the one where I would kind of focus you is most likely to be ESMO, which is this year in early September. We -- I hope -- we certainly will have a dose and so a Phase I data set for safety, but we'll have efficacy data anecdotes from that initial Phase I population.

I hope we're able to show data from a cohort size to be determined of patients from our gynecological study that will have some maturity and at the defined go-forward Phase II dose. And with a particular focus on endometrial cancer is where absolutely it's going to be a cross-trial comparison, so that's not perfect, but I know that people will be comparing whatever data we begin to generate in endometrial to the 37%, 38% response rate in the label for the combination of pembro and lenvatinib.

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Operator [9]

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Your next question comes from Paul Choi from Goldman Sachs.

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Kyuwon Choi, Goldman Sachs Group Inc., Research Division - Equity Analyst [10]

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I have 2, one is commercial and one is financial. The first question is just on the commercial side. As you look ahead towards prostate here, can you maybe comment on how you're thinking about initial discounting in that category or -- and/or patient assistance? It's a little bit down the road, I recognize. So just maybe some early thoughts there, and how you can maybe improve formulary access or position for Rubraca there?

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Patrick J. Mahaffy, Clovis Oncology, Inc. - Co-Founder, CEO, President & Executive Director [11]

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We haven't given much thought, if any, to discounting in the prostate world. I think that we're coming into a market where, yes, there we will be 2 of us, but there's a pretty significant amount of interest in the class and willingness to use the class. I don't think that we're going to have any issues related to formulary access with Rubraca, when -- especially there's only 2 drugs likely to be approved of the class in the indication. So from a discounting standpoint, I don't really perceive a need. Paul, the second part of your question, again, sorry, I got lost in my answer for the first.

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Anna Sussman, Clovis Oncology, Inc. - VP of IR [12]

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Patient assistance.

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Patrick J. Mahaffy, Clovis Oncology, Inc. - Co-Founder, CEO, President & Executive Director [13]

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Patient assistance. Sorry. I would imagine with patient assistance, you're going to see a similar dynamic where for Medicare patients, whose co-pay is not supported by foundations and foundations do exist and do support co-pays for prostate cancer patients with Medicare, that it would be a dynamic similar to that which we've seen in ovarian where we would effectively supply free drug for that percentage of Medicare patients who cannot access co-pay support from the foundation and who meet a certain financial threshold that means that we should not require them a co-pay. Just to reiterate what I think all of you know, we are not allowed to provide co-pay assistance to Medicare patients. So that's why the foundation support or us supplying the free drug as we do in ovarian is going to be a part of the mix.

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Kyuwon Choi, Goldman Sachs Group Inc., Research Division - Equity Analyst [14]

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Okay. And my second question is financial and more strategic in nature. And I guess, Pat, the cash guidance to second half of 2021 is exclusive of any potential repayments of you outstanding 2021 convertible, $97 million. So I guess, ahead of that, what is the appetite for potentially doing either a strategic review or thinking about some sort of restructuring or reorg of the business?

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Patrick J. Mahaffy, Clovis Oncology, Inc. - Co-Founder, CEO, President & Executive Director [15]

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Yes. I think that we -- as I noted and Dan noted in our prepared remarks, we've reduced our cash burn pretty considerably. We've reduced the planned trials that we had intended. We've managed very modest, both year-over-year in head count and are getting good -- tremendous amount of work out of the people we have, including allocating people now to the new FAP program. I do think there's likely to be a possibility of some form of refinancing those September '21's in a noncash way, as we have successfully done in the past with other bonds.

So while I don't have anything to announce today, I'm optimistic that over time, we'll be able to do something on a moving forward basis that is noncash. And I think that you will see not only do we get into the second half of 2021, if we're able to do something to refinance those bonds, our net use of cash is going to continue to go down over the next several years.

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Operator [16]

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Your next question comes from Tazeen Ahmad from Bank of America.

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Tazeen Ahmad, BofA Merrill Lynch, Research Division - VP [17]

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Just to keep focus on prostate cancer as we approach your PDUFA, I just wanted to get a better sense about how you're thinking about commercial strategy as it relates to detailing oncologists versus urologists? This was one dynamic, I think, that you have been discussing leading up to the filing, I don't know, as we get closer if you've changed your view on which specialists you'll be focusing on initially? Or if you're trying to do both oncologists and urologists at the same time? And then I have a follow-up question on ovarian, if I may.

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Patrick J. Mahaffy, Clovis Oncology, Inc. - Co-Founder, CEO, President & Executive Director [18]

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Yes. So the majority of our detailing and I believe that the majority of patients treated and of our sales are going to be through the medical oncology community. There are a group of urology practices called LUGPAs, which kind of is easy, it stands for large urology group practices, many of whom are of which have become fairly large and have become fairly good at continuing to treat their patients with multiple different therapies, including, in many cases, abiraterone and enzalutamide. Some of these practices have even brought into their practice, medical oncologists, so that they can treat and manage any side effects associated with those agents or with chemotherapy. And they would certainly be able to manage delivery and any management of side effects of Rubraca.

We think that probably represents somewhere around 15% of the men who probably would be treated, and the remainder would be by the medical oncology community. I had the opportunity to meet with a number of KOLs at ASCO GU in San Francisco, and they very clearly want the opportunity to manage the patients with Rubraca. So I think it will be more in the medical committee than in urology, except for these very sophisticated large practices.

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Tazeen Ahmad, BofA Merrill Lynch, Research Division - VP [19]

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Okay. So do you feel like your sales force is rightsized for that focus? And if you do deem as this launch progresses that you want to have more contacts with urologists, would you need to hire more folks for that?

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Patrick J. Mahaffy, Clovis Oncology, Inc. - Co-Founder, CEO, President & Executive Director [20]

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I don't think so. I think in any event, we want to gain experience over a period of time with these LUGPAs before we would even consider moving on to a broader community-based urology community. So I don't think anything is likely to move us in that direction too early in the launch. And yes, I do believe, and we've looked at this extensively that we're rightsized to support our current indications as well as to launch in the prostate.

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Tazeen Ahmad, BofA Merrill Lynch, Research Division - VP [21]

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Okay. And then for your originally approved indication in ovarian, can you tell us whether the penetration that you're looking to get now is to get the doctors who have been prescribing to prescribe more? Or is most of your efforts being placed on trying to get new docs who have not yet prescribed Rubraca?

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Patrick J. Mahaffy, Clovis Oncology, Inc. - Co-Founder, CEO, President & Executive Director [22]

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So it's both. We do know that physicians often develop their own unique algorithm for whom they want to treat in the maintenance setting and for whom they want to continue with observation. And we very much want that algorithm to evolve to -- maintenance is a really good idea for every women who's got recurrent ovarian cancer and they should be treated with Rubraca. So we very clearly want to find those physicians who gained experience with Rubraca in a subset of their patients to then expand that subset to everyone, who qualifies for the indication and for the drug. There are a number of practices that still have not treated women with recurrent ovarian with the PARP inhibitor or have not treated a patient with Rubraca as their chosen PARP inhibitor, and we are very much focused on those practices as well.

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Operator [23]

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Your next question comes from Andrew Berens from SVB Leerink.

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Andrew Scott Berens, SVB Leerink LLC, Research Division - MD of Targeted Oncology & Senior Research Analyst [24]

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I have a couple on (inaudible) and then one on prostate. I guess could you give us a little more detail about the HRR screening that you're doing in that trial? How does it differ from the repair deficiency testing that was done in the ovarian trials? And any color that you can give us on the prevalence in the different tumor types would be appreciated.

And then just also, what type of response rates would you need to see in the different tumor types? How should we think about the benchmarks that the FDA would be looking for?

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Patrick J. Mahaffy, Clovis Oncology, Inc. - Co-Founder, CEO, President & Executive Director [25]

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Yes. So the -- well, the testing is pretty straightforward. It is 5 genes that are tested using a panel from Foundation Medicine, looking at both germline and somatic mutations of these 5 genes. I don't think we've announced the 5 genes. I don't mind -- I think it might even be available on clinicaltrials.gov. But the most relevant of the 5 are BRCA1 and BRCA2. The tumor types that we are looking at are all solid tumors. We haven't announced, again, those tumor types, but you can imagine that it includes pancreatic, that it includes a subset of breast cancer patients. It will include bladder, it will include some other tumor types where to your earlier question or to the -- well, a part of your question, where the percentage of patients might be in the 2%, 3%, 1% range, but remember, the idea here is to enroll around 100 patients from around 5 different tumor types. And so the number of patients per tumor type is going to be if you average it out, around 20.

So the number we're looking for is not a big number in order to satisfy the discussion that we had with FDA. But we are aware that these are going to be, as is often the case, a more later line patient population. And in each case, the data in the BRCA population is likely to be approved, and I'm talking about response rate, Andy, to whatever is a later line standard of care for those patients, not limited to BRCA-mutated patients, but to whatever is available and approved in that patient population. So it will vary by the tumor type.

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Andrew Scott Berens, SVB Leerink LLC, Research Division - MD of Targeted Oncology & Senior Research Analyst [26]

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Okay. And then I'm just sorry, what would be -- in the different tumor types for those 5 mutations, what percentage would it be for the commercial opportunity, approximately? And I'm sure it ranges, but are we talking about same as prostate or more like ovarian cancer?

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Patrick J. Mahaffy, Clovis Oncology, Inc. - Co-Founder, CEO, President & Executive Director [27]

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One of the things we're trying to get a handle on is, as is true for ovarian and is definitely true in prostate is, is it also true that in these other tumor types in the more advanced patients that the incidence of somatic mutations increases, whether there's either some form of enrichment or some reaction to prior therapies. So I think what I would do is, say, it's not going to be the 12% that you would see in prostate, it's not going to be the 25% you would see in ovarian. I think you need to think of sort of mid-single digits as a fair approximation across all of these other solid tumor types. So 4% or 5%, somatic and germline, feels like a reasonable average.

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Andrew Scott Berens, SVB Leerink LLC, Research Division - MD of Targeted Oncology & Senior Research Analyst [28]

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Right. Okay. And then just a quick question on the prostate market. If -- obviously, Lynparza is under review and their label and their data included patients that were BRCA1, BRCA2 and ATM. I guess what's your sense about whether AZ will get ATM on the label? And if they do, what do you think the commercial implications are for Rubraca?

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Patrick J. Mahaffy, Clovis Oncology, Inc. - Co-Founder, CEO, President & Executive Director [29]

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We never talk about that here. It's really interesting. So the number of physicians who have had experience treating ATM patients with PARP inhibitors, who believe PARP inhibitors helped ATM patients is vanishingly low. And the response rate data, as you've seen now across multiple studies is in the 10% to 12% response range, not the 45% to 50% that you see in BRACA. And so it just isn't as reactive a patient population to a PARP inhibitor as it is in BRCA.

The reason I can't answer your question is, yes, I saw that they have shown the data for the mixed population of BRCA, ATM patients, and in my memory, it's around 7.5 months versus around 4.5, 5 months. But they've clearly hit the endpoint. They showed us the median PFS for the ATM, BRCA and other subset populations. But we've never seen a Kaplan-Meier curve for ATM patients broken out independently, including in the update they showed at ASCO GU. And the reason that is so important is that's going to be a more relevant way to determine whether there's any evidence of activity versus their control arm, and their control arm isn't even standard of care. They didn't allow chemo in the control arm. They only allowed second-line enzalutamide or abiraterone. So I think it has to be looked at with even more of a grain of salt.

So we're kind of on the fence about whether they get it -- not that it matters what matters is what FDA thinks. But in the debate we had internally, we sometimes think because we've been told so many times in our studies, yes, you can group them all together, but we're going to look at the individual contributions by mutation or by HRD status or whatever is they're looking at. And I would guess that they would have heard the same thing. As to what it means commercially, I don't think it will change things if they get ATM and we're limited to BRCA. In the short term, people will run their test and they'll determine what -- which of the agents they want to use, whether it's ATM or BRCA patients. Obviously, it does have ramifications for us. We'll complete enrollment in TRITON3 in a year or so, and that obviously did enroll ATM patients as well as BRCA patients.

And so in the -- what's sauce for goose is sauce for the gander story, I'm kind of rooting for them to get ATM because I believe then that we would have a high likelihood of getting ATM ourselves out of the TRITON2 study, which would expand our population from the TRITON2 label as soon as we get it from the 12% to 13% we see now to a total of somewhere between 20% and 25% of prostate cancer patients. So it would be an advantage for us to have it. And so if they get it, I would be optimistic that we would do.

One of the things that was interesting, again, as we think about choice is, our understanding from the trial is that their assay required a biopsy. They did not use a plasma-based assay in the PROfound trial, and our understanding is they did not work with a plasma assay company to go back and reevaluate their data. So they're going to come out marketing, but their label is going to require them to get a biopsy. If you use archived data kind of as we discussed before, you're going to get archived tissue, you're going to be able to identify the germline mutations, but you're going to miss a ton of the somatic mutations, which really do emerge over the course of the progression of the disease. We, of course, are using a simple-to-use plasma assay. I actually think that's going to be a real advantage when we get out into the marketplace.

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Operator [30]

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Our next question comes from Ed White from H.C. Wainwright.

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Edward Patrick White, H.C. Wainwright & Co, LLC, Research Division - MD of Equity Research & Senior Healthcare Analyst [31]

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So just a couple of quick ones. Pat, can you tell us anything about the duration of patients being on drug in second-line maintenance? Have you seen some improvement there as well?

And then also just on the second-line ovarian maintenance market, you've sort of [capped it at] the 35% to 45% penetration level. And just wanted to get your thoughts on European penetration levels.

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Patrick J. Mahaffy, Clovis Oncology, Inc. - Co-Founder, CEO, President & Executive Director [32]

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Yes. Duration is in the 7 to 7.5 month range. So we're pleased with this and about 85% to 90% of our use remains at the 300-milligram dose. And so that speaks not only to duration but the tolerability. So I'm really -- we're really pleased with the progress we're making there. In Europe, it varies a little bit by country. And the adoption has been in this 45% range. I will say, it may just be from not having quite the experience our U.S. crew has had, but they like we did in the U.S., I've heard from the opinion leaders that maintenance now is going to be broadly adopted over because it's approved, and there will be far more use of maintenance beyond the early use in the BRCA patients because that's where olaparib was first approved in maintenance. So it remains to be seen. But right now, you should be thinking of penetration and adoption is being similar in Europe as it is in the United States.

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Edward Patrick White, H.C. Wainwright & Co, LLC, Research Division - MD of Equity Research & Senior Healthcare Analyst [33]

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Great. And then just on the patient assistance program, you did go from 28% in the fourth quarter last year down to 18% in the fourth quarter this year. Just wanted to get your thoughts on the trend for 2020.

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Patrick J. Mahaffy, Clovis Oncology, Inc. - Co-Founder, CEO, President & Executive Director [34]

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It's a little early to trend out 2020. We thought when we had this call, our Q1 call this year, which would have been in May, that the Q1 number, which was good, it was 19% or 20%, I think Dan, was going to be our best quarter because Q1 were the Foundations we thought would have their most funding. And it continued to come down over the course of the year. Now there is some continuing funding of the Foundations, which do provide the support.

But as we have noted on several of these calls, we have sharpened our review for the patients by referring everybody to an SP who will then conduct an investigation of insurance and what they're able to afford and that -- which has caused no eligible patient not to get the drug. We continue to provide free drug, but we have found through a better investigation that we can tighten our controls, and that has contributed to a lower percentage of patients on the PARP.

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Anna Sussman, Clovis Oncology, Inc. - VP of IR [35]

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We have time for 1 more question.

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Operator [36]

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The last question comes from Gena Wang from Barclays.

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Huidong Wang, Barclays Bank PLC, Research Division - Research Analyst [37]

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Just wondering, Pat, do you anticipate any seasonality for first quarter 2020? And also EU revenue seems like had marginal growth. Any additional color you can give in terms of reimbursement and future revenue contribution.

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Patrick J. Mahaffy, Clovis Oncology, Inc. - Co-Founder, CEO, President & Executive Director [38]

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In Europe?

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Huidong Wang, Barclays Bank PLC, Research Division - Research Analyst [39]

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Europe, yes.

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Patrick J. Mahaffy, Clovis Oncology, Inc. - Co-Founder, CEO, President & Executive Director [40]

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Okay. So seasonality in Q1, I don't -- I think we probably saw a little seasonality with the holidays in Q4. I don't anticipate a lot of seasonality in Q1. Q4, we did see an impact of the Christmas season, to a far lesser extent at Thanksgiving, but definitely Christmas. So I don't think there's going to be much seasonality in Q1 that we can anticipate.

With regards to reimbursement, you're aware that in every country in Europe, once you're approved, you negotiate reimbursement. We've successfully completed those negotiations now in every of the 5 major territories. And we did see some growth driven primarily by German sales in Q4, some impact from the launch into the -- beyond the small private pay market in the U.K. in Q4, and we anticipate now continuing growth in Germany and the U.K. but also, hopefully, growth coming from launches in France, Italy and Spain over the course of this year.

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Huidong Wang, Barclays Bank PLC, Research Division - Research Analyst [41]

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Okay. If I may, just one last question. I joined the call a bit late. If already asked, apologize. Just wondering, will you -- when will you give a revenue guidance for 2020?

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Patrick J. Mahaffy, Clovis Oncology, Inc. - Co-Founder, CEO, President & Executive Director [42]

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I thought I was going to get through this call. Yes, Gena, somebody already asked that and I answered it. So we're done. No. Last year, I think we gave it in the summer. We do in the August call is my memory, August -- early August. I'm not predicting that, but that feels realistic to me. We need to get our feet wet in the prostate market, pending approval. And I'd like to see directionally how the launches are going in the EU before we would give a formal guidance. So we have not done it yet, but I could see us doing it sometime in the middle of the year.

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Anna Sussman, Clovis Oncology, Inc. - VP of IR [43]

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Thanks, everyone, for your interest in Clovis today. And if you have any follow-up questions, you can call me at (303) 625-5502 or Breanna at (303) 625-5023. The call can be accessed via replay of our webcast at clovisoncology.com beginning in about an hour and it will be available for 30 days. Again, thanks for your interest and time. Thank you, and have a good day.

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Operator [44]

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This concludes today's conference call. Thank you for participating. You may now disconnect.