Clovis Oncology Inc. (CLVS) CEO Patrick Mahaffy has made it clear he wants to sell the Boulder, Colorado-based biotech, which focuses on developing cancer drugs. So far, nobody’s come knocking.
That no buyers have stepped up must rankle shareholders, who have seen their investment in the company drop more than 90% in the past five years. Adding to the misery, investors face share dilution, as Clovis is one of eight biotechs going to the secondary markets to raise sorely need cash. he company is planning to sell more than 11 million shares, hoping to raise $85 million.
There’s no question the secondary offering was not Mahaffy’s first choice. He’s been seeking a suitor for a few years, saying during 2019’s J.P. Morgan confab that “Everybody knows where to find me and every company in this industry is for sale,” according to a FiercePharma article.
Much of the money Covis raises will be used to support Rubraca, the company’s oncology drug that recently received expanded approval to treat prostate cancer. The okay failed to get hearts fluttering. FiercePharma reported that Leerink Partners analyst Andrew Berens wrote in a note to clients that the company would have a difficult time differentiating the drug from competitors, including Lynparza from Merck & Co. Inc. (MRK) and AstraZeneca (AZN)'s Zejula, which GlaxoSmithKline (GSK) acquired when it bought Tesaro.
Even Mahaffy conceded that Clovis doesn’t have the marketing muscle to go head to head with Rubraca rivals. Over the long run, with GlaxoSmithKline's resources, “if they choose to, they can put resources into a lot more clinical development programs than we can,” Mahaffy said, which could lead to additional approvals for Zejula “and therefore advantages.”
As far back as last August, Berens wrote that shareholders’ negative opinion of Clovis had reached unprecedented levels driven primarily by the lack of M&A for the company, adding that the opinion was unlikely to change until a buyer emerges.
One thing in Clovis’s favor is that members of Big Pharma highly value oncology assets. Evidence of this are two recent deals: Bristol-Myers Squibb Co.’s (BMY) acquisition of Celgene and Eli Lilly and Co.’s (LLY) purchase of Loxo. Clovis hopes it can find a buyer, too.
Disclosure: The author holds a position in Bristol-Myers Squibb and Eli Lilly.
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