Business Corpus: Clovis Pops After Cancer Drug Gets OK; Smaller Players CrashClovis popped midday Friday after the FDA approved another use for its ovarian cancer drug Rubraca — prodding shares of rival Tesaro to topple. The post Clovis Pops After Cancer Drug Gets OK; Smaller Players Crash appeared first on Investor's Business Daily.

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Clovis Oncology (CLVS) popped midday Friday after the Food and Drug Administration approved another use for its ovarian cancer drug Rubraca — prodding shares of rival Tesaro (TSRO) to topple and other smaller players to crash.

On the stock market today, Clovis jetted up 5.9% to close at 55.52. Tesaro, on the other hand, slid 3.1% to 54.70. AstraZeneca (AZN), which also makes a rival drug, rose a fractionto 35.42.

All three make drugs known as PARP inhibitors, approved to treat ovarian cancer. U.S. regulators approved Clovis' drug Rubraca on Friday as a maintenance treatment for patients who either partially or fully responded to treatment with chemotherapy.

"We are grateful that the FDA expedited review of this maintenance treatment indication, so that physicians can begin offering it to appropriate patients beginning today," Clovis Chief Executive Patrick Mahaffy said in a prepared statement.

Immuno-Oncology Stocks Ravaged

The news reverberated through immuno-oncology stocks. NewLink Genetics (NLNK), which makes a drug similar to epacadostat, collapsed 42.6% to 4.20. Nektar Therapeutics (NKTR) and Armo Biosciences (ARMO), both of which make immuno-oncology drugs, crashed 7.5% to 93.87, and 10.1% to 35.89, respectively.

Armo makes a drug known as AM0010. In the wake of epacadostat and Keytruda's failure in melanoma, Armo management argued AM0010 has shown promise as a monotherapy in several tumor types, whereas epacadostat didn't, Leerink analyst Jonathan Chang said in a note. Further, AM0010 has a different mechanism and approach from epacadostat, he said.

"Although competition in the emerging immuno-oncology space is fierce and Armo's target markets, especially in the (advanced lung cancer) and (kidney cancer) are highly competitive and dynamic, we believe AM0010 has the potential to address a large commercial opportunity," he said.

Cleanest And Safest?

Clovis is third behind AstraZeneca and Tesaro to grab approval to treat the broader group of patients. But the label for Rubraca doesn't include warnings of liver enzyme elevations, which had previously been a concern.

The label for AstraZeneca's Lynparza warns against pneumonitis, or inflammation of the lungs that occurs without an infection. Patients treated with Tesaro's Zejula are cautioned about blood toxicity and cardiovascular effects, he said.

Rubraca is the cleanest and safest drug in its class, RBC analyst Kennen MacKay said in a note to clients.

"We see these dynamics driving Rubraca's competitive positioning in the recurrent maintenance market despite being third to market behind AstraZeneca and Tesaro," he said.

Differentiating Treatments

Piper Jaffray analyst Christopher Raymond kept his neutral rating on Tesaro stock in his report to clients.

"Competition and lack of differentiation in the PARP inhibitor space has long been one of our primary concerns for Tesaro's Zejula," he said. "The approval of a third PARP inhibitor for maintenance in recurrent ovarian cancer does little to quell our concerns."

Like RBC's MacKay, Raymond expects the PARP inhibitors to be differentiated on their safety. This "does not favor Zejula." The announcement underscores the competitive pressure intensifying in the space, he said.

"The similarities among the three PARP inhibitors continue to grow," Raymond said. "As time progresses, we think differentiators in clinical (effectiveness) may include drug resistance mechanisms and warrant close monitoring."

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