Seeking Alpha: Clovis Oncology Trying To Rebuild A Once-Bright Outlook

In a market where biotechs that have done nothing wrong can be down 40% or more from prior highs, you can probably imagine what's happened to biotechs that have disappointed the Street. Clovis Oncology (NASDAQ:CLVS) certainly fits into the latter group, as a surprisingly negative update in November on the efficacy of its lead drug has pushed the shares down almost 75% over the past year and down closer to 80% from my last article on the company.

There are certainly very good reasons to be cautious around Clovis. Neither of its two most advanced drugs will be first to market, and it's unclear if the company can get approval for rociletinib or commercial acceptance even if it is approved. While rucaparib may have a better future, competition and identification of patients most likely to respond could be limiting factors.

In total, the market has probably overreacted to the rociletinib disappointment and that is likely shadowing the valuation of rucaparib as well. This is a consummate "show me" market for biotech, though, and Clovis comes up short of getting gold stars across the board on those attributes that biotech investors prefer. The potential upside here is still worthwhile, but I can't argue that the risk-reward balance is as compelling given the overall carnage in the sector and the option options available.

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Clovis Oncology Trying To Rebuild A Once-Bright Outlook

Seeking Alpha: Competition Will Be Tough, But Clovis Oncology Has Legitimate Compounds

One of the contributory causes to biotech bubbles seems to be a collective amnesia on the part of investors regarding the fact that not every drug launched for an indication is going to succeed. Even in underserved indications like lung cancer, there are winners and losers and competitive differentiation is an important part of long-term success.

In the case of Clovis Oncology (NASDAQ:CLVS), I think investors are right to be concerned about the potential competitive pressures from AstraZeneca (NYSE:AZN) and Tesaro (NASDAQ:TSRO) among others, but I also think the market is underestimating the value of the company's lead drug candidates for lung and ovarian cancer.

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Competition Will Be Tough, But Clovis Oncology Has Legitimate Compounds