The Science





Rucaparib or Rubraca® is a PARP inhibitor currently being investigated for use as an anti-cancer agent by Clovis Oncology. It has been approved for the maintenance of Ovarian cancer, however it is also currently being investigated in three Phase III trials for the treatment of Ovarian, Prostate and Bladder cancers. Exploratory studies in other tumour types are also underway.





Rucaparib is a potent inhibitor of PARPs or Poly (ADP-Ribose) Polymerase proteins, PARPs play a pivotal role in repairing DNA damage and maintaining genomic stability in cells.



Cells can have certain genomic mutations such as BRCA1/2 or mutations in genes used for repairing DNA double strand breaks which would otherwise cause cell death. Tumours with these mutations must rely on alternative methods to repair DNA damage.



PARP enzymes (particularly PARP1/2) play a critical role in repairing the DNA in cells that have these mutations. Inhibition of these PARP enzymes causes a build up of single stranded proteins which collapse DNA replication forks and eventually cause cell death.





Tumours with these mutations are particularly sensitive to PARP inhibitors. Thus by inhibiting PARPs in the way that Rucaparib does, it will obstruct the DNA replication fork in cancer cells and without a way of replicating DNA the cancer cell will eventually die.



Rucaparib is taken orally twice daily (two 600mg doses), this is a lot less intrusive than other standard of care cancer treatments. It is a first in class pharmaceutical drug targeting the DNA repair enzyme Poly (ADP-Ribose) Polymerase enzyme, meaning there are currently no alternative PARP inhibitors.



The Upside





Rucaparib has or is currently being investigated in 33 clinical trials (yes you read that right). These vary from Phase I through III and are all for various types of cancer.





The two most significant trials are the Phase III confirmatory study that looks at relapsed ovarian cancer patients with BRCA mutations and the Phase III study that looks at metastatic castration-resistant prostate cancer patients with BRCA/ATM mutations.

Another pivotal Phase III trial is looking at rucaparib as a combination therapy with nivolumab (developed by Bristol-Myers Squibb) in patients with ovarian, fallopian tube or peritoneal cancer.



Worldwide there were almost 300,000 new diagnoses of Ovarian cancer in 2018. This is predicted to increase by 55% by 2035. Of these new diagnoses, about 25% of patients will relapse, which would be around 75,000 patients. And roughly 15% of Ovarian cancer diagnoses are related to the BRCA mutations. Thus we can estimate that there are around 11,250 new diagnoses attributed to this mutation in relapsed ovarian cancer patients each year.





Worldwide there were roughly 1.3 million new cases of Prostate cancer in 2018. This has grown about 20% since 2012 and is predicted to grow further into the future. 4.4% of diagnoses are metastatic castration-resistant which would equate to 57,200 patients per year. A study published in the New England Journal of Medicine in 2016 found BRCA mutations in 11.8% of men with metastatic prostate cancer. Thus we can estimate there are roughly 6750 new diagnoses attributed to this mutation each year.



If these two most significant Phase III trials are successful then Rucaparib could be used to treat roughly 18,000 patients a year. Not taking into account any combination therapies if Rucaparib passes the combination therapy trial in collaboration with BMS.



Rucaparib has been toted to cost $16,781 a month, this would be $201,372 a year per patient. At 18,000 patients, the estimated sales could be $ 3,624,696,000 a year.











The Risk

58.4%

Rucaparib in Ovarian cancer has already been shown through a Phase III trial called ARIEL3 to provide a statistically significant improvement in progression free survival (almost double the length of time). The only serious adverse event that occurred in ~2% of patients was anemia, this shows a very good safety profile.



What is most interesting is that the ARIEL3 trial also looked at patients that had ovarian, fallopian tube or peritoneal cancer regardless of BRCA status. This means the drug was approved even though the patients may not necessarily have had the mutation that Rucaparib is developed to inhibit the enzyme for. If all the patients had the mutation, even better results would be expected.



The TRITON programme for Rucaparib in Prostate cancer is still ongoing but results presented at ESMO 2018 Congress show strong potential. The FDA granted Rucaparib Breakthrough Therapy Designation for treating these Prostate cancer patients based on these results.



A 44% Objective Response Rate was reported with median duration of response not reached. 51% confirmed Prostate Specific Antigen response rate and the preliminary safety data was consistent with the ARIEL3 study. Considering the study was done in patients that had previous lines of therapy, a 44% response rate is actually quite good.





The Conclusion





Rucaparib is a first in class treatment with what looks to be great potential. There are numerous clinical trials underway to investigate its effects and I believe one of them will be a winner. The question is which one.



Clovis has about $650 million in cash but burns about $350 million a year on operating expenses. Admittedly now Rucaparib has been approved for the maintenance of Ovarian Cancer it will start beginning to make some sales ($50 million Q4 2018) to keep it afloat. After looking at the trial results, I am very hopeful it will gain approval for the treatment of Ovarian cancer but slightly less so for Prostate cancer.



With all the Phase I/II trials underway for treatment in various other cancers, I believe one must have blockbuster potential. As long as Clovis can keep itself afloat I think it will do very well long term. Although this may be hard considering its large debt pile and the looming recession.



The fact Rucaparib was able to gain approval for use in ovarian, fallopian and peritoneal cancers without the patients necessarily having the BRCA mutation is quite frankly amazing and definitely draws me towards the Bull side. If it was able to do that in ovarian, fallopian and peritoneal cancers who knows what it could do for the various other cancers currently being investigated.





I am long $CLVS







-OC

Using this chart of the proportional percentage of Big Pharma revenue converted to profits we can estimate that roughly 19% of these sales are converted to profits and a lot of the other revenue would be used to pay off Clovis' operating costs.19% of $3,624,696,000 would be $688,692,240 in profits each year. Considering Clovis lost roughly $346,397,000 over the last year this would leave us with $342,295,240 in earnings.If we divide these earnings by the 52,712,000 shares outstanding we get an EPS of 6.49. By dividing the current share price of $24.71 by the EPS, we can find out the PE ratio, in this case 3.81.If we take the PE ratio and multiply by the $688,692,240 in expected profits once all operating expenses are covered by Rucaparib's sales, we get a Market Cap of $2,623,917,434. This value for Clovis' Market Cap is assuming the PE ratio stays at 3.81, this is an extremely low value and would cause a lot of institutional investors to pile money in. PE ratios of around 24 are normal in this sector. At that PE the company could be worth $16.5 Billion.Assuming the Market Cap of $2,623,917,434, we can divide by the 52,712,000 shares outstanding to get an expected price of $49.78. This is just a little over a 100% upside to the share price as of 29th January 2019.The major risk is that Rucaparib does not generate successful results for these two Phase III trials and thus the PARP inhibitor does not gain market approval. In general, there is achance that a drug will gain final approval if it is in Phase III. This rises to 86.4% if it reaches its primary endpoint, but it just shows there are still hurdles to go.For both Phase III trials to be successful and Rucaparib to be approved in both ovarian and prostate cancers, this chance drops to 34%.Disclaimer:I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company who is mentioned in this article. This article is not investment advice, and can't be relied upon by anyone for any reason except, arguably, entertainment purposes. I am not an investment advisor.