CLOVIS ONCOLOGY, INC. Forward-Looking Information
This Quarterly Report on Form 10-Q and the information incorporated herein by reference includes statements that are, or may be deemed, "forward-looking statements." In some cases, these forward-looking statements can be identified by the use of forward-looking terminology, including the terms "believes," "estimates," "anticipates," "expects," "plans," "intends," "may," "could," "might," "will," "should," "approximately" or, in each case, their negative or other variations thereon or comparable terminology, although not all forward-looking statements contain these words. They appear in a number of places throughout this Quarterly Report on Form 10-Q and include statements regarding our intentions, beliefs, projections, outlook, analyses or current expectations concerning, among other things, the market acceptance and commercial viability of our approved product, the development and performance of our sales and marketing capabilities, the performance of our clinical trial partners, third party manufacturers and our diagnostic partners, our ongoing and planned non-clinical studies and clinical trials, the timing of and our ability to make regulatory filings and obtain and maintain regulatory approvals for our product candidates, including our ability to confirm clinical benefit and safety of our approved product through confirmatory trials and other post-marketing requirements, the degree of clinical utility of our products, particularly in specific patient populations, expectations regarding clinical trial data, expectations regarding sales of our products, our results of operations, financial condition, liquidity, prospects, growth and strategies, the industry in which we operate, including our competition and the trends that may affect the industry or us.
By their nature, forward-looking statements involve risks and uncertainties because they relate to events, competitive dynamics and industry change and depend on the economic circumstances that may or may not occur in the future or may occur on longer or shorter timelines than anticipated. We caution you that forward-looking statements are not guarantees of future performance and that our actual results of operations, financial condition and liquidity and the development of the industry in which we operate may differ materially from the forward-looking statements contained herein. Any forward-looking statements that we make in this Quarterly Report on Form 10-Q speak only as of the date of such statement, and we undertake no obligation to update such statements to reflect events or circumstances after the date of this Quarterly Report on Form 10-Q or to reflect the occurrence of unanticipated events.
You should also read carefully the factors described in the "Risk Factors" in Part I, Item 1A in our most recent Annual Report on Form 10-K filed with theU.S. Securities and Exchange Commission ("SEC") as supplemented by the risk factors set forth herein, as updated from time to time in our subsequentSEC filings, to better understand the risks and uncertainties inherent in our business and underlying any forward-looking statements. You are advised, however, to consult any further disclosures we make on related subjects in our Quarterly Reports on From 10-Q, Current Reports on Form 8-K and our website. Clovis Oncology®, the Clovis logo and Rubraca® are trademarks ofClovis Oncology, Inc. inthe United States and in other selected countries. All other brand names or trademarks appearing in this report are the property of their respective holders. Unless the context requires otherwise, references in this report to "Clovis," the "Company," "we," "us" and "our" refer toClovis Oncology, Inc. , together with its consolidated subsidiaries. Overview We are a biopharmaceutical company focused on acquiring, developing and commercializing innovative anti-cancer agents inthe United States ,Europe and additional international markets. We target our development programs for the treatment of specific subsets of cancer populations, and simultaneously develop, with partners, for those indications that require them, diagnostic tools intended to direct a compound in development to the population that is most likely to benefit from its use. Our marketed product Rubraca, an oral small molecule inhibitor of poly ADP-ribose polymerase ("PARP"), is marketed inthe United States for two indications specific to recurrent epithelial ovarian, fallopian tube or primary peritoneal cancer and also an indication specific to metastatic castration-resistant prostate cancer ("mCRPC"). The initial indication received approval from the FDA inDecember 2016 and covers the treatment of adult patients with deleterious BRCA (human genes associated with the repair of damaged DNA) mutation (germline and/or somatic)-associated epithelial ovarian, fallopian tube, or primary peritoneal cancer who have been treated with two
or
more chemotherapies
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and selected for therapy based on an FDA-approved companion diagnostic for Rubraca. InApril 2018 , the FDA also approved Rubraca for the maintenance treatment of adult patients with recurrent epithelial ovarian, fallopian tube, or primary peritoneal cancer who are in a complete or partial response to platinum-based chemotherapy. The approval in this second, broader and earlier-line indication on a priority review timeline was based on positive data from the phase 3 ARIEL3 clinical trial. Diagnostic testing is not required for patients to be prescribed Rubraca in this maintenance treatment indication. InMay 2020 , the FDA approved Rubraca for the treatment of adult patients with mCRPC associated with a deleterious BRCA mutation (germline and/or somatic) who have been treated previously with androgen receptor-directed therapy and a taxane-based chemotherapy and selected for therapy based on an FDA-approved companion diagnostic for Rubraca. The FDA approved this indication under accelerated approval based on objective response rate and duration of response data from the TRITON2 clinical trial. We launched Rubraca for this indication in theU.S. following receipt of the approval. As an accelerated approval, continued approval for this indication may be contingent upon verification and description of clinical benefit in confirmatory trials. The TRITON3 clinical trial is expected to serve as the confirmatory study for Rubraca's approval in mCRPC as well as a potential second-line label expansion. TRITON3 is a Phase 3 study evaluating Rubraca versus physician's choice of chemotherapy or second-line androgen deprivation therapy based on PFS in mCRPC patients with BRCA and ATM mutations. We anticipate the initial data readout from TRITON3 in the second quarter of 2022. The timing for the TRITON3 data readout is contingent upon the occurrence of the protocol-specified number of progression events. InEurope , theEuropean Commission granted a conditional marketing authorization inMay 2018 for Rubraca as monotherapy treatment of adult patients with platinum-sensitive, relapsed or progressive, BRCA mutated (germline and/or somatic), high-grade epithelial ovarian, fallopian tube, or primary peritoneal cancer, who have been treated with two or more prior lines of platinum-based chemotherapy, and who are unable to tolerate further platinum-based chemotherapy. InJanuary 2019 , theEuropean Commission granted a variation to the marketing authorization to include the maintenance treatment of adult patients with recurrent epithelial ovarian, fallopian tube, or primary peritoneal cancer who are in a complete or partial response to platinum-based chemotherapy. With this approval, Rubraca is now authorized inEurope for certain patients in the recurrent ovarian cancer maintenance setting regardless of their BRCA mutation status. Following successful reimbursement negotiations, Rubraca has been launched in each ofGermany ,United Kingdom ,Italy ,France ,Spain ,the Netherlands andSwitzerland . InDecember 2020 , Rubraca met the primary study endpoint of significantly improving PFS versus chemotherapy in the ARIEL4 confirmatory study. ARIEL4 study results were presented at a medical congress meeting inMarch 2021 . ARIEL4 is a Phase 3 multicenter, randomized study of Rubraca versus chemotherapy, which enrolled relapsed ovarian cancer patients with BRCA mutations (inclusive of germline and/or somatic) who had received two or more prior lines of chemotherapy. Completion of ARIEL4 is a post-marketing commitment in theU.S. andEurope . Beyond our labeled indications, we have a clinical development program underway to further evaluate Rubraca in a variety of solid tumor types, either as monotherapy or in combination with other agents, including several studies as part of our ongoing clinical collaboration with Bristol Myers Squibb Company ("Bristol Myers Squibb") to evaluate its immunotherapy OPDIVO® (nivolumab) in combination with Rubraca. We anticipate initial data of Rubraca monotherapy versus placebo from our ATHENA study in the first quarter of 2022, with results of the separate analysis of Rubraca in combination with Opdivo anticipated in the second half of 2022 based on protocol-defined assumptions. However, the actual timing of ATHENA data readouts is dependent on the occurrence of the protocol-specified number of progression events. The three anticipated data readouts, ATHENA monotherapy, ATHENA combination and TRITON3 discussed above, provide the potential to obtain approvals that reach larger patient populations in earlier lines of therapy for ovarian and prostate cancers, in which Rubraca is currently approved in later-line indications. We initiated the Phase 2 LODESTAR study inDecember 2019 to evaluate Rubraca as monotherapy treatment in patients with recurrent solid tumors associated with a deleterious mutation in homologous recombination repair genes. Based on initial results from the ongoing study, we see encouraging evidence of activity in patients with a biallelic tumor mutation of BRCA or other target genes. Importantly, for BRCA-mutated breast and pancreatic and certain other tumors types, the majority of tumors have biallelic loss. Based on these early data, we are evaluating the potential development timeline and commercial opportunity as well as determining a diagnostic strategy. We hold worldwide rights to Rubraca.December 19, 2020 , was the earliest date that an abbreviated new drug application ("ANDA") could have been filed for Rubraca. Since that time, generic entities have been permitted to file an ANDA for rucaparib with a Paragraph IV certification asserting that one or more patents listed in the Orange Book for 27
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Rubraca are either not infringed, invalid, or not enforceable. We have not received any Paragraph IV certification notice letters, and to our knowledge, no ANDA filings for rucaparib have been made to date. InMarch 2021 , the FDA issued revised draft product-specific guidance for industry on rucaparib camsylate that replaces the guidance previously issued inFebruary 2018 . Because rucaparib camsylate is considered a cytotoxic drug, the published FDA guidance requires any party seeking approval for a generic form of rucaparib to file a Bio-IND and recommends showing bioequivalence in "female patients with a deleterious BRCA mutation associated with advanced cancer who have been treated with two or more chemotherapies and are receiving a regimen of rucaparib camsylate." The guidance sets forth additional criteria, including the demonstration of bioequivalence to a 90 percent confidence interval. Demonstrating bioequivalence with Rubraca would only be an initial step in the ANDA approval process. In a potential ANDA litigation, a generic challenger would also need to successfully challenge or design around Orange Book listed patents, some of which do not expire until 2035. Pursuant to our license and collaboration agreement with 3BP, entered into inSeptember 2019 , we have initiated development of a peptide-targeted radionuclide therapy ("PTRT") and imaging agent targeting fibroblast-activating protein ("FAP"). PTRT uses cancer cell-targeting peptides to deliver radiation-emitting radionuclides specifically to tumors. FAP is highly expressed in many epithelial cancers, including more than 90 percent of breast, lung, colorectal and pancreatic carcinomas. FAP is highly expressed in cancer-associated fibroblasts ("CAFs") across a majority of cancer types potentially making it an actionable target across a wide array of solid tumors. We have completed sufficient preclinical work to support an IND for the lead candidate under our license and collaboration agreement, designated internally as FAP-2286. Accordingly, we submitted two INDs for FAP-2286 for use as imaging and treatment agents inDecember 2020 to support an initial Phase 1 study to determine the dose, schedule and tolerability of FAP-2286 as a therapeutic agent with expansion cohorts planned in multiple tumor types as part of a global development program. The FDA cleared the two INDs and we initiated the Phase 1 LuMIERE clinical study inJune 2021 . LuMIERE is a Phase 1/2 study of 177Lu-FAP-2286 is evaluating the compound in patients with advanced solid tumors. FAP-2286 labeled with gallium-68 (68Ga-FAP-2286) will be utilized to identify tumors that contain FAP for treatment in this study and once the recommended Phase 2 dose is determined, Phase 2 expansion cohorts are currently planned in five tumor types and anticipated to initiate in 2022. We believe FAP-2286 provides us with the potential to seek accelerated approvals in multiple tumor types.
During 2022, we also anticipate the first presentation of LuMIERE data at a medical meeting, the launch of our combination study program to explore FAP-2286 in combination with other oncology compounds, and a potential IND filing of FAP-2286 linked to a FAP-targeted alpha-emitter PTRT.
We holdU.S. and global rights to FAP-2286, excludingEurope (defined to includeRussia ,Turkey andIsrael ), where 3BP retains rights. In addition to our planned studies, theUniversity of California San Francisco is sponsoring a separate, investigator-initiated, imaging-only study with gallium-68 labeled FAP-2286 (NCT04621435) to evaluate FAP expression in five tumor types; their study is currently enrolling. We are also collaborating with 3BP on a discovery program directed to up to three additional, undisclosed targets for targeted radionuclide therapy, to which we would have global rights for any resulting product candidates. We may potentially file an additional IND, for a candidate from this discovery program, in the second half of 2022. Lucitanib, our product candidate currently in clinical development, is an investigational, oral, potent angiogenesis inhibitor which inhibits vascular endothelial growth factor receptors 1 through 3 ("VEGFR1-3"), platelet-derived growth factor receptors alpha and beta ("PDGFR ?/?") and fibroblast growth factor receptors 1 through 3 ("FGFR1-3"). Lucitanib inhibits the same three pathways as Lenvima® (lenvatinib), which has received an FDA approval for use in endometrial cancer in combination with Keytruda® (pembrolizumab), a PD-1 inhibitor. This, together with preclinical data for lucitanib in combination with a PD-1 inhibitor that demonstrated enhanced anti-tumor activity compared to that of single agents, represent a scientific rationale for development of lucitanib in combination with a PD-1 inhibitor, and inFebruary 2019 , lucitanib was added to our clinical collaboration with Bristol Myers Squibb. The Phase 1b/2 LIO-1 study is evaluating the combination of lucitanib and Opdivo in gynecologic cancers. Interim data from the non-clear cell ovarian cancer expansion cohort was presented at ASCO 2021 and the initial efficacy data does not support further development in non-clear cell ovarian cancer. The remaining three cohorts, which include non-clear cell endometrial, cervical and clear-cell ovarian and endometrial cancers are ongoing. Interim endometrial data are expected to be presented at an upcoming medical meeting, and as the data from each cohort mature, we will be able to anticipate when we can present at medical meetings. 28 Table of Contents
We hold the global (excluding
We have three key strategies on which we intend to focus: first, we seek to drive Rubraca revenue growth; second, we intend to grow our targeted radionuclide therapy program, which includes the LuMIERE Phase 1/2 clinical study of FAP-2286, which is the first peptide-targeted radionuclide therapy targeting FAP and is now enrolling; and third, we seek to achieve long-term financial stability.
We commenced operations inApril 2009 . To date, we have devoted substantially all of our resources to identifying and in-licensing product candidates, performing development activities with respect to those product candidates and the general and administrative support of these operations. For the six months endedJune 30, 2021 and 2020, we have generated$74.9 million and$82.5 million , respectively, in product revenue related to sales of Rubraca. We have never been profitable and, as ofJune 30, 2021 , we had an accumulated deficit of$2,745.5 million . We incurred net losses of$132.7 million and$191.6 million for the six months endedJune 30, 2021 and 2020, respectively. We had cash and cash equivalents totaling$230.2 million atJune 30, 2021 . License Agreements Rucaparib
InJune 2011 , we entered into a license agreement with Pfizer to obtain the exclusive global rights to develop and commercialize Rubraca. The exclusive rights are exclusive even as to Pfizer and include the right to grant sublicenses. Pursuant to the terms of the license agreement, we made a$7.0 million upfront payment to Pfizer and are required to make additional payments to Pfizer for the achievement of certain development and regulatory and sales milestones and royalties on sales as required by the license agreement. Prior to the FDA approval of Rubraca, we made milestone payments of$1.4 million , which were recognized as acquired in-process research and development expense. During 2016 through 2020, we paid Pfizer a total of$82.5 million in milestone payments related to FDA andEuropean Commission approvals received for Rubraca. These milestone payments were recognized as intangible assets and are amortized over the estimated remaining useful life of Rubraca. We are obligated under the license agreement to use commercially reasonable efforts to develop and commercialize Rubraca and we are responsible for all ongoing development and commercialization costs for Rubraca. We are required to make regulatory milestone payments to Pfizer of up to an additional$8.0 million in aggregate if specified clinical study objectives and regulatory filings, acceptances and approvals are achieved. In addition, we are obligated to make sales milestone payments to Pfizer if specified annual sales targets for Rubraca are met, which relate to annual sales targets of$250.0 million and above, which, in the aggregate, could amount to total milestone payments of$170.0 million , and tiered royalty payments at a mid-teen percentage rate on net sales, with standard provisions for royalty offsets to the extent we need to obtain any rights from third parties to commercialize Rubraca. The license agreement with Pfizer will remain in effect until the expiration of all of our royalty and sublicense revenue obligations to Pfizer, determined on a product-by-product and country-by-country basis, unless we elect to terminate the license agreement earlier. If we fail to meet our obligations under the agreement and are unable to cure such failure within specified time periods, Pfizer can terminate the agreement, resulting in a loss of our rights to Rubraca and an obligation to assign or license to Pfizer any intellectual property rights or other rights we may have in Rubraca, including our regulatory filings, regulatory approvals, patents and trademarks for Rubraca. InApril 2012 , we entered into a license agreement with AstraZeneca to acquire exclusive rights associated with Rubraca under a family of patents and patent applications that claim methods of treating patients with PARP inhibitors in certain indications. The license enables the development and commercialization of Rubraca for the uses claimed by these patents. AstraZeneca also receives royalties on net sales of Rubraca.
FAP-2286 and the Radionuclide Therapy Development Program
InSeptember 2019 , we entered into a global license and collaboration agreement with 3BP to develop and commercialize a PTRT and imaging agent targeting FAP. The lead candidate, designated internally as FAP-2286, is being developed pursuant to a global development plan agreed to by the parties. We are responsible for the costs of all preclinical and clinical development activities described in the plan, including the costs for a limited number of 3BP full-time equivalents and external costs incurred during the preclinical development phase of the collaboration. Upon the 29
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signing of the license and collaboration agreement inSeptember 2019 , we made a$9.4 million upfront payment to 3BP, which we recognized as acquired in-process research and development expense. Pursuant to the terms of the FAP agreement, we are required to make additional payments to 3BP for annual technology access fees and upon the achievement of certain development and regulatory milestone events (or on certain dates, whichever occur earlier). We are also obligated to pay 3BP single- to low-double-digit royalties on net sales of the FAP-targeted therapeutic product and imaging agent, based on the volume of annual net sales achieved. In addition, 3BP is entitled to receive 34% of any consideration, excluding royalties on the therapeutic product, pursuant to any sublicenses we may grant. We are obligated under the license and collaboration agreement to use diligent efforts to develop FAP-2286 and commercialize a FAP-targeted therapeutic product and imaging agent, and we are responsible for all commercialization costs in our territory. The agreement with 3BP will remain in effect until the expiration of our royalty obligations to 3BP, determined on a product-by-product and country-by-country basis, unless we elect to terminate the agreement earlier. If we fail to meet our obligations under the agreement and are unable to cure such failure within specified time periods, 3BP can terminate the agreement, resulting in a loss of our rights. 3BP also has the right to terminate the agreement under certain circumstances in connection with our change of control in which the acquiring party retains a product competitive with the FAP-targeted therapeutic product or, in the event marketing authorization has not yet been obtained, does not agree to the then-current global development plan. We submitted two INDs for FAP-2286 for use as imaging and treatment agents inDecember 2020 to support an initial Phase 1 study to determine the dose and tolerability of FAP-2286 as a therapeutic agent with expansion cohorts planned in multiple tumor types as part of a global development program. InApril 2021 , we made a milestone payment to 3BP under the license and collaboration agreement of$2.2 million as a result of theFDA's acceptance of the IND for the treatment agent.
InFebruary 2020 , we finalized the terms of a drug discovery collaboration agreement with 3BP to identify up to three additional, undisclosed targets for peptide-targeted radionuclide therapy, to which we will obtain global rights for any resulting product candidates. We are responsible for the costs of all preclinical and clinical development activities conducted under the discovery program, including the costs for a limited number of 3BP full-time equivalents and external costs incurred during the discovery and preclinical development phase for each collaboration target. The discovery collaboration agreement was effectiveDecember 31, 2019 , for which we incurred a$2.1 million technology access fee, which we accrued and recognized as a research and development expense. Pursuant to the terms of the discovery collaboration agreement, we are required to make additional payments to 3BP for annual technology access fees and upon the achievement of certain development and regulatory milestone events (or on certain dates, whichever occur earlier). We are also obligated to pay 3BP a 6% royalty on net sales of License Products (as defined in the agreement), based on the volume of quarterly net sales achieved. We are obligated under the discovery collaboration agreement to use diligent efforts to develop and commercialize the product candidates, if any, that result from the discovery program, and we are responsible for all clinical development and commercialization costs. The agreement with 3BP will remain in effect until the expiration of our royalty obligations to 3BP, determined on a product-by-product and country-by-country basis, unless we elect to terminate the agreement earlier. If we fail to meet our obligations under the agreement and are unable to cure such failure within specified time periods, 3BP can terminate the agreement, resulting in a loss of our rights. Lucitanib
OnNovember 19, 2013 , we acquired all of the issued and outstanding capital stock of EOS pursuant to the terms set forth in that certain Stock Purchase Agreement, dated as ofNovember 19, 2013 (the "Stock Purchase Agreement"), by and among the Company, EOS, its shareholders (the "Sellers") andSofinnova Capital V FCPR, acting in its capacity as the Sellers' representative. Following the acquisition, EOS became a wholly-owned subsidiary of the Company. Under the terms of the Stock Purchase Agreement, in addition to the initial purchase price paid at the time of the closing of the acquisition and other license fees due to Advenchen described below, we will also be obligated to pay to the Sellers a milestone payment of$65.0 million upon obtaining the first NDA approval from the FDA with respect to lucitanib. 30 Table of Contents InOctober 2008 , Ethical Oncology Science, S.p.A. ("EOS") (now known as Clovis Oncology Italy S.r.l.) entered into an exclusive license agreement withAdvenchen Laboratories LLC ("Advenchen") to develop and commercialize lucitanib on a global basis, excludingChina . We are obligated to pay Advenchen tiered royalties at percentage rates in the mid-single digits on net sales of lucitanib, based on the volume of annual net sales achieved. In addition, after giving effect to the first and second amendments to the license agreement, we are required to pay to Advenchen 25% of any consideration, excluding royalties, we receive from sublicensees, in lieu of the milestone obligations set forth in the agreement. We are obligated under the agreement to use commercially reasonable efforts to develop and commercialize at least one product containing lucitanib, and we are also responsible for all remaining development and commercialization costs for lucitanib. The license agreement with Advenchen will remain in effect until the expiration of all of our royalty obligations to Advenchen, determined on a product-by-product and country-by-country basis, unless we elect to terminate the agreement earlier. If we fail to meet our obligations under the agreement and are unable to cure such failure within specified time periods, Advenchen can terminate the agreement, resulting in a loss of our rights to lucitanib. Financial Operations Overview Revenue Product revenue is derived from sales of our product, Rubraca, inthe United States andEurope . We distribute our product principally through a limited number of specialty distributor and specialty pharmacy providers, collectively, our customers. Our customers subsequently sell our products to patients and healthcare providers. Separately, we have arrangements with certain payors and other third parties that provide for government-mandated and privately-negotiated rebates, chargebacks and other discounts. Revenue is recorded net of estimated rebates, chargebacks, discounts and other deductions as well as estimated product returns (collectively, "variable considerations"). Revenue from product sales are recognized when customers obtain control of our product, which occurs at a point in time, typically upon delivery to the customers. For further discussion of our revenue recognition policy, see Note 2, Summary of Significant Accounting Polices in the Revenue Recognition section. In the three and six months endedJune 30, 2021 , we recorded product revenue of$36.8 million and$74.9 million , respectively related to sales of Rubraca. Our ability to generate revenue and become profitable depends upon our ability to successfully commercialize products. Any inability on our part to successfully commercialize Rubraca inthe United States ,Europe and any foreign territories where it may be approved, or any significant delay in such approvals, could have a material adverse impact on our ability to execute upon our business strategy and, ultimately, to generate sufficient revenues from Rubraca to reach or maintain profitability or sustain our anticipated levels of operations. We supply commercially labeled Rubraca free of charge to eligible patients who qualify due to financial need through our patient assistance program and the majority of these patients are on Medicare. This product is distributed through a separate vendor who administers the program on our behalf. It is not distributed through our specialty distributor and specialty pharmacy network. This product is neither included in the transaction price nor the variable considerations to arrive at product revenue. Manufacturing costs associated with this free product is included in selling, general and administrative expenses. For the six months endedJune 30, 2021 , the supply of this free drug was approximately 16% of the overall commercial supply or the equivalent of$11.1 million in commercial value. Our ability to generate product revenues for the quarter endedJune 30, 2021 continued to be negatively affected by the COVID-19 pandemic due to fewer diagnoses and fewer patients going to in-person office visits as oncology practices and patients continue to adapt to the impact of the virus. As a result of the COVID-19 pandemic, ourU.S. and European sales forces have had physical access to hospitals, clinics, doctors and pharmacies curtailed and/or have been limited. Our European launches occurred in an environment in which our field-based personnel have not been allowed to visit hospitals since as early as lateFebruary 2020 . Similarly, we launched Rubraca for prostate cancer in theU.S beginning inMay 2020 , but our physical access to hospital, clinics, doctors and pharmacies has been limited. Cost of Sales - Product
Product cost of sales consists primarily of materials, third-party manufacturing costs as well as freight and royalties owed to our licensing partners for Rubraca sales.
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Cost of Sales - Intangible Asset Amortization
Cost of sales for intangible asset amortization consists of the amortization of capitalized milestone payments made to our licensing partners upon FDA approval of Rubraca. Milestone payments are amortized on a straight-line basis over the estimated remaining patent life of Rubraca.
Research and Development Expenses
Research and development expenses consist of costs incurred for the development of our product candidates and companion diagnostics, which include:
license fees and milestone payments related to the acquisition of in-licensed
? products, which are reported on our Consolidated Statements of Operations and
Comprehensive Loss as acquired in-process research and development;
? employee-related expenses, including salaries, benefits, travel and share-based
compensation expense;
? expenses incurred under agreements with contract research organizations
("CROs") and investigative sites that conduct our clinical trials;
? the cost of acquiring, developing and manufacturing clinical trial materials;
? costs associated with non-clinical activities and regulatory operations;
? market research and disease education; and
? activities associated with the development of companion diagnostics for our
product candidates. Research and development costs are expensed as incurred. License fees and milestone payments related to in-licensed products and technology are expensed if it is determined that they have no alternative future use. Costs for certain development activities, such as clinical trials and manufacturing of clinical supply, are recognized based on an evaluation of the progress to completion of specific tasks using data such as patient enrollment, clinical site activations or information provided to us by our vendors. Our research and development expenses decreased during the three and six months endedJune 30, 2021 compared to the same periods in the prior year. We expect research and development costs to be lower in the full year 2021 compared to 2020. We did not see material disruption to our clinical trials as a result of the COVID-19 pandemic for the three and six months endedJune 30, 2021 . However, we may see disruption during the remainder of 2021. For example, new patient recruitment in certain clinical studies may be affected and the conduct of clinical trials may vary by geography as some regions are more adversely affected. Additionally, we may slow or delay enrollment in certain trials to manage expenses. 32 Table of Contents The following table identifies research and development costs on a program-specific basis for our products under development. Personnel-related costs, depreciation and share-based compensation are not allocated to specific programs, as they are deployed across multiple projects under development and, as such, are separately classified as personnel and other expenses in the table below (in thousands): Three months ended June 30, Six months ended June 30, 2021 2020 2021 2020 (in thousands) Rucaparib Expenses Research and development$ 22,553 $ 45,928 $ 51,477 $ 87,658 Rucaparib Total 22,553 45,928 51,477 87,658 FAP Expenses Research and development 2,359 1,849 4,573 2,844 Acquired in-process research and development 2,204 - 2,204 - FAP Total 4,563 1,849 6,777 2,844 Lucitanib Expenses Research and development 2,572 1,335 5,069 2,831 Lucitanib Total 2,572 1,335 5,069 2,831 Rociletinib Expenses Research and development (82) (868) (65) (800) Rociletinib Total (82) (868) (65) (800)
Personnel and other expenses 18,357 21,634
37,510 45,566
Total $ 47,963 $ 69,878 $ 100,768 $ 138,099 Selling, General and Administrative Expenses
Selling, general and administrative expenses consist principally of salaries and related costs for personnel in executive, commercial, finance, legal, investor relations, human resources and information technology functions. Other general and administrative expenses include facilities expenses, communication expenses, information technology costs, corporate insurance and professional fees for legal, consulting and accounting services. With the FDA approval of Rubraca onDecember 19, 2016 , all sales and marketing expenses associated with Rubraca are included in selling, general and administrative expenses. As a result of the COVID-19 pandemic, ourU.S. and European sales forces have had physical access to hospitals, clinics, doctors and pharmacies curtailed and/or have been limited, which have decreased sales and marketing expenses during the three and six months endedJune 30, 2021 . The COVID-19 pandemic has accelerated a preference by oncology practices for more digital programming, including digital, peer-to-peer interactions and reduced in-person promotion. In order to meet these changing preferences, we adopted a hybrid commercial strategy combining increased digital promotion activities, greater online resources and more peer-to-peer interactions with reduced and more targeted in-person promotion. New tools and performance indicators based on this hybrid approach were rolled out during the fourth quarter of 2020. We adopted this strategy in order to better reach customers in the way they want to be reached with the goal of returning to growth, especially as the ongoing impact of COVID-19 is reduced. The adoption of this strategy also contributed to decreased sales and marketing expenses during the three and six months endedJune 30, 2021 due to the reduction in size of ourU.S. commercial organization by approximately 45 employees during the fourth quarter of 2020.
Acquired in-process research and development expenses consist of upfront
payments to acquire a new drug compound, as well as subsequent milestone
payments. Acquired in-process research and development payments are immediately
expensed provided that the drug has not achieved regulatory approval for
marketing and, absent obtaining such approval, has no alternative future use.
Once regulatory approval is received, payments to acquire rights, and the
related milestone payments, are capitalized and the amortization of such assets
recorded to intangible asset amortization cost of sales.
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Other Income and Expense
Other income and expense is primarily comprised of foreign currency gains and
losses resulting from transactions with CROs, investigative sites and contract
manufacturers where payments are made in currencies other than the U.S. dollar.
Other expense also includes interest expense recognized related to our
convertible senior notes.
Critical Accounting Policies and Significant Judgments and Estimates
Our discussion and analysis of our financial condition and results of operations are based on our financial statements, which have been prepared in accordance withU.S. generally accepted accounting principles. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, expenses, revenue and related disclosures. On an ongoing basis, we evaluate our estimates and judgments, including those related to revenue, intangible asset impairment, clinical trial accruals and share-based compensation expense. We base our estimates on historical experience, known trends and events and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
For a description of our critical accounting policies, please see Management's
Discussion and Analysis of Financial Condition and Results of Operations
included in our Annual Report on Form 10-K for the fiscal year ended
New Accounting Standards From time to time, the FASB or other standards-setting bodies issue new accounting pronouncements. Updates to the FASB Accounting Standards Codification are communicated through the issuance of an Accounting Standards Update. Unless otherwise discussed, we believe that the impact of recently issued guidance, whether adopted or to be adopted in the future, is not expected to have a material impact on our Consolidated Financial Statements upon adoption.
To understand the impact of recently issued guidance, whether adopted or to be adopted, please review the information provided in Note 2, Summary of Significant Accounting Policies, in the Notes to the Unaudited Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q.
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Results of Operations
Comparison of Three Months Ended
Three months ended June 30,
2021 2020
U.S. ex-U.S. Total U.S. ex-U.S. Total
Transaction price $ 35,431 $ 16,162 $ 51,593 $ 43,270 $ 6,227 $ 49,497
Sales deductions:
Government rebates and
chargebacks (4,751) (6,244) (10,995) (3,802) (2,834) (6,636)
Discounts and fees (3,000) (778) (3,778) (2,749) (225) (2,974)
Total sales deductions (7,751) (7,022) (14,773) (6,551) (3,059) (9,610)
Product revenue 27,680 9,140 36,820 36,719 3,168 39,887
Operating expenses:
External cost of sales -
product 5,402 2,892 8,294 7,522 1,598 9,120
Cost of sales -
intangible asset
amortization 620 723 1,343 557 723 1,280Research and development 43,774 1,985 45,759 67,862 2,016 69,878 Selling, general and administrative 26,351 6,567 32,918 35,969 5,933 41,902 Acquired in-process research and development 2,204 - 2,204 - - - Other operating expenses 3,884 - 3,884 355 - 355 Total expenses 82,235 12,167 94,402 112,265 10,270 122,535 Operating loss$ (54,555) $ (3,027) (57,582)$ (75,546) $ (7,102) (82,648) Other income (expense): Interest expense (8,770) (6,739) Foreign currency (loss) gain (206) 142 Loss on extinguishment of debt - (3,277) Other income 107 239 Other income (expense), net (8,869) (9,635) Loss before income taxes (66,451) (92,283) Income tax benefit (expense) 3 36 Net loss$ (66,448) $ (92,247)
Product Revenue. Total product revenue for the three months endedJune 30, 2021 decreased compared to the same period in the prior year primarily due to fewer diagnoses and fewer patient starts in theU.S. , primarily caused by the ongoing COVID-19 pandemic as there have been fewer patients going to in-person office visits as oncology practices and patients continue to adapt to the impact of the virus.U.S. product revenue for the three months endedJune 30, 2021 decreased$9.0 million compared to the same period in the prior year while ex-U.S. product revenue for the three months endedJune 30, 2021 increased$6.0 million compared to the same period in the prior year. Product revenue is recorded net of variable considerations comprised of rebates, chargebacks and other discounts. Product revenue for the three months endedJune 30, 2021 was$27.7 million inthe United States and$9.1 million outside ofthe United States . Total variable considerations represented 28.6% and 19.4% of the transaction price recognized in the three months endedJune 30, 2021 and 2020, respectively. The increase in variable considerations is primarily due to the European National Health Service rebates related to our sales inEurope and thePublic Health Service /340B discounts related to our sales in theU.S. Countries inEurope contract larger government rebates and discounts compared to theU.S. contributing to the overall increase in variable considerations. As sales inEurope increase in percentage terms compared to theU.S. , variable considerations will also increase. ThePublic Health Service ("PHS") discount related to ourU.S. sales has increased as a result of expanding 340B Drug Program purchases by covered entities. Cost of Sales - Product. Product cost of sales for the three months endedJune 30, 2021 decreased primarily due to the decrease in product revenue. Product cost of sales primarily relate to manufacturing, freight and royalties costs associated with Rubraca sales in the period.U.S. product cost of sales for the three months endedJune 30, 2021 decreased$2.1 million compared to the same period in the prior year due to the decrease in product revenue. 35 Table of Contents Ex-U.S. product cost of sales for the three months endedJune 30, 2021 increased$1.3 million compared to the same period in the prior year due to the increase in product revenue. Cost of Sales - Intangible Asset Amortization. In the three months endedJune 30, 2021 and 2020, we recognized cost of sales of$1.3 million associated with the amortization of capitalized milestone payments related to the approvals of Rubraca by the FDA and theEuropean Commission . Research and Development Expenses. Except for activities related to medical research and disease education, research and development expenses are attributable to ourU.S. segment. Research and development expenses decreased during the three months endedJune 30, 2021 compared to the same period in the prior year primarily due to lower research and development costs for Rubraca. The decrease related to our TRITON2 study for prostate cancer, our ARIEL2, ARIEL3 and ATHENA studies for ovarian cancer, manufacturing costs and personnel costs. These decreases were partially offset by increased costs related to FAP and lucitanib. Selling, General and Administrative Expenses. Selling, general and administrative expenses decreased during the three months endedJune 30, 2021 compared to the same period in the prior year due to a$5.6 million decrease in personnel costs and share-based compensation expense due to the reduction in size of ourU.S. commercial organization by approximately 45 employees during the fourth quarter of 2020. In addition, we had a$2.1 million decrease in legal expenses. The total decrease in selling, general and administrative expenses mostly related to ourU.S. segment while our ex-U.S. selling, general and administrative expenses remained relatively consistent during the three months endedJune 30, 2021 compared to the same period in the prior year. Other Operating Expenses. During the three months endedJune 30, 2021 and 2020, we recognized other operating expenses related to our dedicated production train at Lonza. We expect these expenses to remain consistent during the remainder of 2021 due to our fixed facility fee each quarter since we expect to have sufficient inventory and do not plan to produce inventory at Lonza during the remainder of 2021. As discussed in Note 14, Commitments and Contingencies, we amended this agreement inJune 2021 , resulting in the derecognition of the lease components recognized under the original agreement. The derecognition of the lease components, payment of$1.1 million to Lonza and derecognition of fixed assets related to our Lonza production train resulted in a loss of$0.3 million , which is included in other operating expenses. Lonza is guaranteeing a minimum percentage usage of this production train for third parties and Lonza would reduce our fixed facility fee starting in 2023 based on this minimum percentage usage. If Lonza is able to utilize greater than the minimum guaranteed percentage, it will increase the reduction to our fixed facility fee. Interest Expense. Interest expense increased during the three months endedJune 30, 2021 compared to the same period in the prior year primarily due to interest expense under our financing agreement related to our ATHENA trial. Loss on Extinguishment of Debt. InApril 2020 , we entered into a privately negotiated exchange agreement with a Holder of our 2021 Notes, pursuant to which we issued to such Holder of the 2021 Notes approximately$36.1 million in Additional 2024 Notes of our currently outstanding 2024 Notes in exchange for approximately$32.8 million in aggregate principal of 2021 Notes held by such Holder, which resulted in a$3.3 million loss on extinguishment of debt. 36 Table of Contents
Comparison of Six Months Ended
Six months ended June 30,
2021 2020
U.S. ex-U.S. Total U.S. ex-U.S. Total
Transaction price $ 75,493 $ 27,240
(9,836) (10,368) (20,204) (9,342) (5,877) (15,219)
Discounts and fees (6,276) (1,380) (7,656) (6,377) (413) (6,790)
Total sales deductions (16,112) (11,748) (27,860) (15,719) (6,290) (22,009)
Product revenue 59,381 15,492 74,873 76,022 6,429 82,451
Operating expenses:
Cost of sales - product 11,560 5,002 16,562 15,577 2,639 18,216 Cost of sales - intangible asset amortization 1,241 1,445
2,686 1,047 1,445 2,492 Research and development
94,604 3,960 98,564 134,149 3,950 138,099 Selling, general and administrative
50,672 12,187 62,859 72,124 12,376 84,500 Acquired in-process research and development
2,204 - 2,204 - - -
Other operating expenses 7,591 - 7,591 3,805 - 3,805
Total expenses 167,872 22,594 190,466 226,702 20,410 247,112
Operating loss (108,491) (7,102) (115,593) (150,680) (13,981) (164,661)
Other income (expense):
Interest expense (16,807) (16,300)
Foreign currency loss (752) (735)Loss on convertible senior notes conversion - (7,791) Loss on extinguishment of debt
- (3,277)
Other income 290 1,081
Other income (expense), net (17,269) (27,022)
Loss before income taxes (132,862) (191,683)
Income tax benefit 137 104
Net loss $ (132,725) $ (191,579)
Product Revenue. Total product revenue for the six months ended June 30, 2021
decreased compared to the same period in the prior year primarily due to fewer
diagnoses and fewer patient starts in the U.S. , primarily caused by the ongoing
COVID-19 pandemic as there have been fewer patients going to in-person office
visits as oncology practices and patients continue to adapt to the impact of the
virus.
Product revenue is recorded net of variable considerations comprised of rebates, chargebacks and other discounts. Product revenue for the six months endedJune 30, 2021 was$59.4 million inthe United States and$15.5 million outside ofthe United States . Total variable considerations represented 27.1% and 21.1% of the transaction price recognized in the six months endedJune 30, 2021 and 2020, respectively. The increase in variable considerations is primarily due to the European National Health Service rebates related to our sales inEurope and the PHS/340B discounts related to our sales in theU.S. Countries inEurope contract larger government rebates and discounts compared to theU.S. contributing to the overall increase in variable considerations. As sales inEurope increase in percentage terms compared to theU.S. , variable considerations will also increase. The PHS discount related to ourU.S. sales has increased as a result of expanding 340B Drug Program purchases by covered entities. Cost of Sales - Product. Product cost of sales for the six months endedJune 30, 2021 decreased primarily due to the decrease in product revenue. Product cost of sales primarily relate to manufacturing, freight and royalties costs associated with Rubraca sales in the period.U.S. product cost of sales for the six months endedJune 30, 2021 decreased$4.0 million compared to the same period in the prior year due to the decrease in product revenue. Ex-U.S. product cost of sales for the six months endedJune 30, 2020 increased$2.4 million compared to the same period in the prior year due to the increase in product revenue. 37 Table of Contents
Cost of Sales - Intangible Asset Amortization. In the six months endedJune 30, 2021 and 2020, we recognized cost of sales of$2.7 million and$2.5 million , respectively, associated with the amortization of capitalized milestone payments related to the approvals of Rubraca by the FDA and theEuropean Commission . Research and Development Expenses. Except for activities related to medical research and disease education, research and development expenses are attributable to ourU.S. segment. Research and development expenses decreased during the six months endedJune 30, 2021 compared to the same period in the prior year primarily due to lower research and development costs for Rubraca. The decrease related to our TRITON2 study for prostate cancer, our ARIEL2, ARIEL3 and ATHENA studies for ovarian cancer, manufacturing costs and personnel costs. These decreases were partially offset by increased costs related to FAP and lucitanib. Selling, General and Administrative Expenses. Selling, general and administrative expenses decreased during the six months endedJune 30, 2021 compared to the same period in the prior year due to a$16.2 million decrease in marketing costs, personnel costs and share-based compensation expense primarily due to the reduction in size of ourU.S. commercial organization by approximately 45 employees during the fourth quarter of 2020. In addition, we had a$2.7 million decrease in legal expenses and a$1.7 million decrease in travel and meetings due to the COVID-19 pandemic. The total decrease in selling, general and administrative expenses mostly related to ourU.S. segment while our ex-U.S. selling, general and administrative expenses remained relatively consistent during the six months endedJune 30, 2021 compared to the same period in the prior year. Acquired in-process research and development. InApril 2021 , we made a milestone payment to 3BP under the license and collaboration agreement of$2.2 million as a result of theFDA's acceptance of the IND for the treatment agent. Other Operating Expenses. During the six months endedJune 30, 2021 and 2020, we recognized other operating expenses related to our dedicated production train at Lonza. We expect these expenses to remain consistent during the remainder of 2021 due to our fixed facility fee each quarter since we expect to have sufficient inventory and do not plan to produce inventory at Lonza during the remainder of 2021. As discussed in Note 14, Commitments and Contingencies, we amended this agreement inJune 2021 , resulting in the derecognition of the lease components recognized under the original agreement. The derecognition of the lease components, payment of$1.1 million to Lonza and derecognition of fixed assets related to our Lonza production train resulted in a loss of$0.3 million , which is included in other operating expenses. Lonza is guaranteeing a minimum percentage usage of this production train for third parties and Lonza would reduce our fixed facility fee starting in 2023 based on this minimum percentage usage. If Lonza is able to utilize greater than the minimum guaranteed percentage, it will increase the reduction to our fixed facility fee. Interest Expense. Interest expense remained consistent during the six months endedJune 30, 2021 compared to the same period in the prior year. The$5.1 million increase in interest expense under our financing agreement related to our ATHENA trial was mostly offset by the write off of$4.3 million of unamortized debt issuance costs related to our convertible senior notes transactions during the six months endedJune 30, 2020 . Loss on Convertible Senior Notes Conversion. InJanuary 2020 , we completed a registered direct offering of an aggregate 17,777,679 shares of our common stock at a price of$9.25 per share to a limited number of holders of our 2024 Notes. We used the proceeds of the share offering to repurchase from such holders an aggregate of$123.4 million principal amount of 2024 Notes in privately negotiated transactions. In addition, we paid customary fees and expenses in connection with the transactions. This transaction resulted in a loss of$7.8 million for the six months endedJune 30, 2020 .
Liquidity and Capital Resources
To date, we have principally funded our operations using the net proceeds from public offerings of our common stock, convertible senior notes offerings and our financing agreement related to our ATHENA trial. AtJune 30, 2021 , we had cash and cash equivalents totaling$230.2 million . 38 Table of Contents
The following table sets forth the primary sources and uses of cash for the six
months ended
Six months ended June 30,
2021 2020
Net cash used in operating activities $ (108,645) $ (142,351)
Net cash (used in) provided by investing activities (154) 126,607
Net cash provided by financing activities 99,316 115,651
Effect of exchange rate changes on cash and cash equivalents (542) (304)
Net (decrease) increase in cash and cash equivalents $ (10,025) $ 99,603
Operating Activities
Net cash used in operating activities was lower during the six months endedJune 30, 2021 compared to the same period in the prior year primarily due to a lower net loss adjusted for non-cash items and changes in components of working capital. Investing Activities
There were no significant investing activities during the six months endedJune 30, 2021 while net cash provided by investing activities for the six months endedJune 30, 2020 included sales of available-for-sale securities of$144.6 million , partially offset by purchases of available-for-sale securities of$10.0 million and a milestone payment of$8.0 million . Financing Activities
Net cash provided by financing activities for the six months endedJune 30, 2021 included$72.5 million net proceeds resulting from our "at the market" offerings that occurred during May andJune 2021 and$27.2 million proceeds from borrowings under our financing agreement related to our ATHENA trial. OnMay 17, 2021 , we entered into a distribution agreement (the "Distribution Agreement") withJ.P. Morgan Securities LLC andBofA Securities, Inc. , as agents (the "Agents"), pursuant to which we may offer and sell, from time to time, through the Agents, shares of our common stock having an aggregate offering price of up to$75.0 million in transactions that are deemed to be "at the market" offerings as defined in Rule 415(a)(4) under the Securities Act of 1933, as amended, including sales made by means of ordinary brokers' transactions, including directly on the Nasdaq Global Select Market or into any other existing trading market for the Shares, or sales made to or through a market maker, in block transactions or by any other method permitted by law, including negotiated transactions. Sales may be made at market prices prevailing at the time of a sale or at prices related to prevailing market prices or at negotiated prices. During the period betweenMay 18, 2021 andJune 9, 2021 , we sold an aggregate of 13,492,231 shares of our common stock under the Distribution Agreement resulting gross proceeds of$75.0 million and net proceeds to us of$72.5 million , after deducting commissions and offering expenses, effectively closing out sales we may make pursuant to the Distribution Agreement. The issuance and sale of the shares under the Distribution Agreement were be made pursuant to our effective registration statement on Form S-3 filed with theU.S. Securities and Exchange Commission (the "SEC") onFebruary 25, 2021 (File No. 333-253485) as amended by pre-effective Amendment No. 1 thereto filed with theSEC onMay 5, 2021 . The offering is described in the Company's prospectus datedMay 7, 2021 , as supplemented by a prospectus supplement datedMay 17, 2021 , as filed with theSEC onMay 17, 2021 . We have used and intend to use the net proceeds of this offering for general corporate purposes, including funding of our development programs, sales and marketing expenses associated with Rubraca, repayment, repurchase or refinance of our debt obligations, payment of milestones pursuant to our license agreements, general and administrative expenses, acquisition or licensing of additional product candidates or businesses and working capital.
Operating Capital Requirements
Inthe United States , Rubraca is approved by the FDA for two indications for patients with recurrent epithelial ovarian, fallopian tube or primary peritoneal cancer. Rubraca is also approved by the FDA for prostate cancer. InEurope , Rubraca is approved by theEuropean Commission for two indications for patients with recurrent epithelial 39 Table of Contents ovarian, fallopian tube or primary peritoneal cancer. We expect to incur significant losses for the foreseeable future, as we commercialize Rubraca and expand our selling, general and administrative functions to support the growth in our commercial organization.
As of
Because of the numerous risks and uncertainties associated with research, development and commercialization of pharmaceutical products, it is difficult to estimate the exact amounts of our working capital requirements. Our future funding requirements will depend on many factors, including but not limited to:
? revenues from the sale of our Rubraca product;
? the number and characteristics of the product candidates, companion diagnostics
and indications we pursue;
the achievement of various development, regulatory and commercial milestones
? resulting in required payments to partners pursuant to the terms of our license
agreements;
the scope, progress, results and costs of researching and developing our
? product candidates and related companion diagnostics and conducting clinical
and non-clinical trials;
? the timing of, and the costs involved in, obtaining regulatory approvals for
our product candidates and companion diagnostics;
? the cost of commercialization activities, including marketing and distribution
costs;
? the cost of manufacturing any of our product candidates we successfully
commercialize;
the costs involved in preparing, filing, prosecuting, maintaining, defending
? and enforcing patent claims, including litigation costs and outcome of such
litigation; and
? the timing, receipt and amount of sales, if any, of our product candidates.
Based on current estimates, we believe that our cash, cash equivalents and liquidity available under our financing agreement related to our ATHENA trial, together with current estimates for revenues generated by sales of Rubraca, will allow us to fund our operating plan through at least the next 12 months. We have incurred significant net losses since inception and have relied on our ability to fund our operations through debt and equity financings. We expect operating losses and negative cash flows to continue for the foreseeable future even with Rubraca now generating revenues. Our Rubraca revenues have not been consistent in prior quarters, mainly as a result of the impact of COVID-19 and competition from other products on the market, which has made forecasting revenues difficult. In addition to other factors, future Rubraca revenues will depend, in part, on the timing and extent of any recovery from the impacts of COVID-19. Until we can generate a sufficient amount of Rubraca revenues to finance our cash requirements, which we don't expect in the foreseeable future and which we may never do in sufficient amounts, we expect to finance our operating plan through a combination of public or private equity or debt offerings, collaborations, strategic alliances and other similar licensing arrangements. We cannot be certain that additional funding will be available on acceptable terms, or at all. In the near term, we believe there is adequate flexibility within our operating plan, particularly with managing our expenses, to adjust to variations in our expected Rubraca revenues and the availability and timing of potential sources of financings. As we continue to incur losses, transition to profitability is dependent upon achieving a level of revenue from Rubraca adequate to support our cost structure. We may never achieve profitability, and unless or until we do, we will continue to need to raise additional cash. Impact of COVID-19 Pandemic Our ability to generate product revenues for the three months endedJune 30, 2021 was negatively affected by the COVID-19 pandemic, primarily due to the ongoing effect the pandemic has had on oncology treatment and practice, and in particular, in ovarian cancer, resulting in fewer diagnoses and fewer patients going to in-person office visits in theU.S. As a result of the COVID-19 pandemic, ourU.S. and European sales forces have had physical access to hospitals, clinics, doctors and pharmacies curtailed and/or have been limited. Our European launches occurred in an environment in which our field-based personnel have not been allowed to visit hospitals since as early as lateFebruary 2020 . Similarly, we launched Rubraca for prostate cancer in theU.S beginning inMay 2020 , but our physical access to hospital, clinics, doctors and pharmacies has been limited. It is difficult to discern or predict any trend in new patient starts due to the unpredictability of the COVID-19 situation and the changing competitive landscape. 40 Table of Contents
This curtailment of and/or limited physical access has decreased sales and marketing expenses during the three months endedJune 30, 2021 and may extend through the remainder of 2021. In addition, due to increased travel restrictions, quarantines, "work-at-home" and "shelter-in-place" orders and extended shutdown of certain non-essential business inthe United States , and European andAsia-Pacific countries, in-person conferences and meetings requiring travel will decrease, resulting in a decrease of our selling, general and administrative expenses. We believe that we have sufficient supply of Rubraca and our product candidates to continue our commercial and clinical operations as planned. The COVID-19 pandemic has accelerated a preference by oncology practices for more digital programming, including digital, peer-to-peer interactions and reduced in-person promotion. In order to meet these changing preferences, we adopted a hybrid commercial strategy combining increased digital promotion activities, greater online resources and more peer-to-peer interactions with reduced and more targeted in-person promotion. New tools and performance indicators based on this hybrid approach were rolled out during the fourth quarter of 2020. We adopted this strategy in order to better reach customers in the way they want to be reached with the goal of returning to growth, especially as the ongoing impact of COVID-19 is reduced. We did not see material disruption to our clinical trials as a result of the COVID-19 pandemic for the three and six months endedJune 30, 2021 . However, we may see disruption during the remainder of 2021. For example, new patient recruitment in certain clinical studies may be affected and the conduct of clinical trials may vary by geography as some regions are more adversely affected. Additionally, we may slow or delay enrollment in certain trials to manage expenses. OnMarch 18, 2020 , the Families First Coronavirus Response Act ("FFCR Act"), and onMarch 27, 2020 , the Coronavirus Aid, Relief and Economic Security ("CARES") Act were each enacted in response to the COVID-19 pandemic. The FFCR Act and the CARES Act contain numerous income tax provisions, such as relaxing limitations on the deductibility of interest and the use of net operating losses arising in taxable years beginning afterDecember 31, 2017 . OnMarch 11, 2021 ,President Biden signed an additional coronavirus relief package entitled the American Rescue Plan Act of 2021 ("ARPA"), which included, among other things, provisions relating to stimulus payments to some Americans, extension of several CARES Act relief programs, expansion of the child tax credit, funding for vaccinations and other COVID-19 related assistance programs. The CARES Act, FFCR Act, and the ARPA have not had a material impact on the Company; however, we will continue to examine the impacts that these Acts, as well as any future economic relief legislation, may have on our business. The trading prices for our common stock and of other biopharmaceutical companies have been highly volatile as a result of the coronavirus pandemic. As a result of this volatility and uncertainties regarding future impact of COVID-19 on our business and operations, we may face difficulties raising capital or may only be able to raise capital on unfavorable terms.
Contractual Obligations and Commitments
For a discussion of our contractual obligations, see "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" in our 2020 Annual Report on Form 10-K. For further information regarding our contractual obligations and commitments, see Note 14, Commitments and Contingencies to our unaudited consolidated financial statements included elsewhere in this report.
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