10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934.
For the quarterly period ended June 30, 2020.
☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934.

For the transition period from            to           .

Commission file number: 001-35347

Clovis Oncology, Inc.

(Exact name of Registrant as specified in its charter)

Delaware	90-0475355
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)
5500 Flatiron Parkway, Suite 100
Boulder, Colorado	80301
(Address of principal executive offices)	(Zip Code)

(303) 625-5000

(Registrant’s telephone number, including area code)

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act

Title of Each Class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock par Value $0.001 per share	CLVS	The NASDAQ Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☒    No  ◻

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ⌧    No  ◻

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	⌧	Accelerated filer	◻
Non-accelerated filer	◻	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ◻

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ☐    No  ☒

The number of outstanding shares of the registrant’s common stock, par value $0.001 per share, as of July 31, 2020 was 88,203,011.

CLOVIS ONCOLOGY, INC.

FORM 10-Q

TABLE OF CONTENTS

PART I. Financial Information		3
ITEM 1.	Financial Statements (unaudited)	3
	Consolidated Statements of Operations and Comprehensive Loss — for the three and six months ended June 30, 2020 and June 30, 2019	3
	Consolidated Balance Sheets — as of June 30, 2020 and December 31, 2019	4
	Consolidated Statements of Stockholders’ Equity (Deficit) – for the three and six months ended June 30, 2020	5
	Consolidated Statements of Stockholders’ Equity (Deficit) – for the three and six months ended June 30, 2019	5
	Consolidated Statements of Cash Flows — for the six months ended June 30, 2020 and 2019	6
	Notes to Unaudited Consolidated Financial Statements	7
ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	28
ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk	42
ITEM 4.	Controls and Procedures	42
PART II. Other Information		44
ITEM 1.	Legal Proceedings	44
ITEM 1A.	Risk Factors	45
ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	47
ITEM 3.	Defaults Upon Senior Securities	47
ITEM 4.	Mine Safety Disclosures	47
ITEM 5.	Other Information	47
ITEM 6.	Exhibits	47
SIGNATURES		52

2

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

CLOVIS ONCOLOGY, INC.

Consolidated Statements of Operations and Comprehensive Loss

(Unaudited)

(In thousands, except per share amounts)

	Three months ended June 30,				Six months ended June 30,
	2020		2019		2020		2019
	(in thousands, except per share amounts)				(in thousands, except per share amounts)
Revenues:
Product revenue	$	39,887	$	32,978	$	82,451	$	66,096
Operating expenses:
Cost of sales - product		9,120		6,445		18,216		13,851
Cost of sales - intangible asset amortization		1,280		1,217		2,492		2,337
Research and development		69,878		70,746		138,099		132,777
Selling, general and administrative		41,902		48,029		84,500		95,791
Other operating expenses		355		—		3,805		—
Total expenses		122,535		126,437		247,112		244,756
Operating loss		(82,648)		(93,459)		(164,661)		(178,660)
Other income (expense):
Interest expense		(6,739)		(3,817)		(16,300)		(7,407)
Foreign currency gain (loss)		142		(226)		(735)		(419)
Loss on convertible senior notes conversion		—		—		(7,791)		—
Loss on extinguishment of debt		(3,277)		—		(3,277)		—
Legal settlement loss		—		(25,000)		—		(25,000)
Other income		239		1,899		1,081		4,300
Other income (expense), net		(9,635)		(27,144)		(27,022)		(28,526)
Loss before income taxes		(92,283)		(120,603)		(191,683)		(207,186)
Income tax benefit		36		176		104		336
Net loss		(92,247)		(120,427)		(191,579)		(206,850)
Other comprehensive income (loss):
Foreign currency translation adjustments, net of tax		61		(1)		(42)		(6)
Net unrealized gain on available-for-sale securities, net of tax		(84)		77		(6)		152
Other comprehensive (loss) income:		(23)		76		(48)		146
Comprehensive loss	$	(92,270)	$	(120,351)	$	(191,627)	$	(206,704)
Loss per basic and diluted common share:
Basic and diluted net loss per common share	$	(1.15)	$	(2.27)	$	(2.52)	$	(3.91)
Basic and diluted weighted average common shares outstanding		80,453		53,028		76,057		52,960

See accompanying Notes to Unaudited Consolidated Financial Statements.

3

CLOVIS ONCOLOGY, INC.

Consolidated Balance Sheets

(Unaudited)

(In thousands, except for share amounts)

	June 30,		December 31,
	2020		2019
ASSETS
Current assets:
Cash and cash equivalents	$	261,436	$	161,833
Accounts receivable, net		18,204		20,562
Inventories, net		26,851		26,519
Available-for-sale securities		—		134,826
Prepaid research and development expenses		1,832		3,881
Other current assets		14,515		18,847
Total current assets		322,838		366,468
Inventories		106,337		98,053
Deposit on inventory		—		12,350
Property and equipment, net		13,412		15,287
Right-of-use assets, net		32,363		28,141
Intangible assets, net		68,428		62,920
Goodwill		63,074		63,074
Other assets		21,757		23,311
Total assets	$	628,209	$	669,604
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable	$	24,287	$	32,237
Accrued research and development expenses		45,587		53,214
Lease liabilities		5,028		5,405
Other accrued expenses		37,682		42,228
Total current liabilities		112,584		133,084
Long-term lease liabilities - less current portion		33,786		29,479
Convertible senior notes		504,680		644,751
Borrowings under financing agreement		72,459		34,991
Other long-term liabilities		2,075		1,556
Total liabilities		725,584		843,861
Commitments and contingencies (Note 15)
Stockholders' equity:
Preferred stock, par value $0.001 per share; 10,000,000 shares authorized, no shares issued and outstanding at June 30, 2020 and December 31, 2019		—		—
Common stock, $0.001 par value per share, 200,000,000 shares authorized at June 30, 2020 and December 31, 2019, respectively; 88,196,705 and 54,956,341 shares issued and outstanding at June 30, 2020 and December 31, 2019, respectively		88		55
Additional paid-in capital		2,382,544		2,114,068
Accumulated other comprehensive loss		(44,913)		(44,865)
Accumulated deficit		(2,435,094)		(2,243,515)
Total stockholders' deficit		(97,375)		(174,257)
Total liabilities and stockholders' equity (deficit)	$	628,209	$	669,604

See accompanying Notes to Unaudited Consolidated Financial Statements.

4

CLOVIS ONCOLOGY, INC.

Consolidated Statements of Stockholders’ Equity (Deficit)

(Unaudited)

						Accumulated
				Additional		Other
	Common Stock			Paid-In		Comprehensive		Accumulated
	Shares	Amount		Capital		Income (Loss)		Deficit		Total
	(in thousands, except for share amounts)
January 1, 2020	54,956,341	$	55	$	2,114,068	$	(44,865)	$	(2,243,515)	$	(174,257)
Exercise of stock options	759		—		2		—		—		2
Issuance of common stock from vesting of restricted stock units	662,323		—		—		—		—		—
Share-based compensation expense	—		—		12,961		—		—		12,961
Net unrealized gain on available-for-sale securities	—		—		—		78		—		78
Foreign currency translation adjustments	—		—		—		(103)		—		(103)
Convertible senior notes conversion	17,877,164		18		133,640		—		—		133,658
Net loss	—		—		—		—		(99,332)		(99,332)
March 31, 2020	73,496,587		73		2,260,671		(44,890)		(2,342,847)		(126,993)
Exercise of stock options	6,661		—		(41)		—		—		(41)
Issuance of common stock from vesting of restricted stock units	113,461		—		—		—		—		—
Issuance of common stock under employee stock purchase plan	158,126		—		907		—		—		907
Share-based compensation expense	—		—		13,313		—		—		13,313
Net unrealized loss on available-for-sale securities	—		—		—		(84)		—		(84)
Foreign currency translation adjustments	—		—		—		61		—		61
Issuance of common stock, net of issuance costs	11,090,000		11		83,416		—		—		83,427
Convertible senior notes conversion	3,331,870		4		24,278		—		—		24,282
Net loss	—		—		—		—		(92,247)		(92,247)
June 30, 2020	88,196,705	$	88	$	2,382,544	$	(44,913)	$	(2,435,094)	$	(97,375)

						Accumulated
				Additional		Other
	Common Stock			Paid-In		Comprehensive		Accumulated
	Shares	Amount		Capital		Income (Loss)		Deficit		Total
	(in thousands, except for share amounts)
January 1, 2019	52,797,516	$	53	$	2,034,142	$	(44,634)	$	(1,843,092)	$	146,469
Exercise of stock options	83,132		—		1,093		—		—		1,093
Issuance of common stock from vesting of restricted stock units	113,402		—		—		—		—		—
Share-based compensation expense	—		—		13,639		—		—		13,639
Net unrealized gain on available-for-sale securities	—		—		—		75		—		75
Foreign currency translation adjustments	—		—		—		(5)		—		(5)
Net loss	—		—		—		—		(86,421)		(86,421)
March 31, 2019	52,994,050		53		2,048,874		(44,564)		(1,929,513)		74,850
Exercise of stock options	20,741		—		223		—		—		223
Issuance of common stock from vesting of restricted stock units	63,413		—		—		—		—		—
Issuance of common stock under employee stock purchase plan	92,275		—		1,166		—		—		1,166
Share-based compensation expense	—		—		14,130		—		—		14,130
Net unrealized gain on available-for-sale securities	—		—		—		77		—		77
Foreign currency translation adjustments	—		—		—		(1)		—		(1)
Net loss	—		—		—		—		(120,427)		(120,427)
June 30, 2019	53,170,479	$	53	$	2,064,393	$	(44,488)	$	(2,049,940)	$	(29,982)

See accompanying Notes to Unaudited Consolidated Financial Statements

5

CLOVIS ONCOLOGY, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands)

	Six months ended June 30,
	2020		2019
Operating activities
Net loss	$	(191,579)	$	(206,850)
Adjustments to reconcile net loss to net cash used in operating activities:
Share-based compensation expense		26,274		27,769
Depreciation and amortization		4,128		3,632
Amortization of premiums and discounts on available-for-sale securities		(174)		(884)
Amortization of debt issuance costs		1,423		1,324
Write-off of debt issuance costs related to convertible senior notes transactions		4,344		—
Loss on convertible senior notes conversion		7,791		—
Loss on extinguishment of debt		3,277		—
Legal settlement loss		—		21,000
Changes in operating assets and liabilities:
Accounts receivable		2,359		(2,491)
Inventory		4,357		(35,351)
Prepaid and accrued research and development expenses		(5,328)		5,041
Deposit on inventory		—		—
Other operating assets and liabilities		5,895		(5,587)
Accounts payable		(7,804)		(1,393)
Other accrued expenses		2,686		(2,698)
Net cash used in operating activities		(142,351)		(196,488)
Investing activities
Purchases of property and equipment		(75)		(1,484)
Purchases of available-for-sale securities		(9,962)		(205,779)
Sales of available-for-sale securities		144,644		296,845
Acquired in-process research and development - milestone payment		(8,000)		(15,750)
Net cash provided by investing activities		126,607		73,832
Financing activities
Proceeds from sale of common stock, net of issuance costs		246,727		—
Payment of convertible senior notes		(164,443)		—
Proceeds from borrowings under financing agreement		33,322		6,862
Proceeds from the exercise of stock options and employee stock purchases		868		2,482
Payments on finance leases		(720)		—
Payments on other long-term liabilities		(103)		—
Net cash provided by financing activities		115,651		9,344
Effect of exchange rate changes on cash and cash equivalents		(304)		43
Increase (decrease) in cash and cash equivalents		99,603		(113,269)
Cash and cash equivalents at beginning of period		161,833		221,876
Cash and cash equivalents at end of period	$	261,436	$	108,607
Supplemental disclosure of cash flow information:
Cash paid for interest	$	6,006	$	5,469
Non-cash investing and financing activities:
Vesting of restricted stock units	$	6,255	$	4,283

See accompanying Notes to Unaudited Consolidated Financial Statements.

6

CLOVIS ONCOLOGY, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

1. Nature of Business and Basis of Presentation

Clovis Oncology, Inc. (together with its consolidated subsidiaries, the “Company”, “Clovis”, “we”, “our”, “us”) is a biopharmaceutical company focused on acquiring, developing and commercializing innovative anti-cancer agents in the 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. We have and intend to continue to license or acquire rights to oncology compounds in all stages of development. In exchange for the right to develop and commercialize these compounds, we generally expect to provide the licensor with a combination of upfront payments, milestone payments and royalties on future sales. In addition, we generally expect to assume the responsibility for future drug development and commercialization costs. We currently operate in one segment. Since inception, our operations have consisted primarily of developing in-licensed compounds, evaluating new product acquisition candidates and general corporate activities and since 2016 we have also marketed and sold products.

Our marketed product Rubraca® (rucaparib), an oral small molecule inhibitor of poly ADP-ribose polymerase (“PARP”), is marketed in the 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 United States Food and Drug Administration (“FDA”) in December 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 and selected for therapy based on an FDA-approved companion diagnostic for Rubraca. In April 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.

In May 2018, the European Commission granted a conditional marketing authorization 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. In January 2019, the European 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 in the EU for certain patients in the recurrent ovarian cancer maintenance setting regardless of their BRCA mutation status. Following successful reimbursement negotiations, we have launched Rubraca in each of Germany, United Kingdom, Italy, France and Spain.

In May 2020, the FDA approved Rubraca tablets for the treatment of adult patients with a deleterious BRCA mutation (germline and/or somatic)-associated mCRPC who have been treated with androgen receptor-directed therapy and a taxane-based chemotherapy. The FDA approved this indication under accelerated approval based on objective response rate and duration of response data from the multi-center, single arm TRITON2 clinical trial. We have launched Rubraca for prostate cancer in the U.S. 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 the Rubraca accelerated approval in mCRPC.

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 (“BMS”) to evaluate its immunotherapy OPDIVO® (nivolumab) in combination with Rubraca. We initiated the Phase 2 LODESTAR study in December 2019 to evaluate Rubraca in homologous recombination repair genes across tumor types. The study is evaluating rucaparib as monotherapy treatment in patients with recurrent solid tumors associated with a deleterious mutation in homologous recombination repair genes. Based on our interactions with the FDA, we believe that this study may be registration-

7

enabling for a targeted gene- and tumor-agnostic label, if data from the trial support the potential for an accelerated approval. We may potentially file a supplemental New Drug Application with the FDA for this indication in 2021. We hold worldwide rights to Rubraca.

In addition to Rubraca, we have a second product candidate currently in clinical development. Lucitanib is an investigational, oral, potent inhibitor of the tyrosine kinase activity of vascular endothelial growth factor receptors 1 through 3 (“VEGFR1-3”), platelet-derived growth factor receptors alpha and beta (“PDGFR α/β”) and fibroblast growth factor receptors 1 through 3 (“FGFR1-3”). We believe that data for a drug similar to lucitanib that inhibits these same pathways – when combined with a PD-1 inhibitor – represent a scientific rationale for development of lucitanib in combination with a PD-1 inhibitor, and in February 2019, lucitanib was added to our clinical collaboration with BMS. Encouraging data of VEGF and PARP inhibitors in combination also supports the evaluation of lucitanib combined with Rubraca. Thus, we are currently enrolling Phase 1b/2 combination studies involving lucitanib consist of the Clovis-sponsored LIO-1 study of lucitanib in combination with nivolumab in advanced solid tumors and gynecologic cancers and an arm of the Clovis-sponsored SEASTAR study evaluating lucitanib in combination with Rubraca in advanced solid tumors and ovarian cancer. We hold the global (excluding China) development and commercialization rights for lucitanib.

Following completion of preclinical work to support an investigational new drug application (“IND”) for the lead candidate under our license and collaboration agreement, designated internally as FAP-2286, we plan to conduct global clinical trials. We anticipate submitting two INDs for FAP-2286 for use as imaging and treatment agents, respectively, in Q4 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. We hold U.S. and global rights to FAP-2286, excluding Europe (defined to include Russia, Turkey and Israel), where 3BP retains rights. We also have agreed with 3BP to collaborate on a discovery program directed to up to three additional, undisclosed targets for peptide-targeted radionuclide therapy, to which we would obtain global rights for any resulting product candidates.

In September 2019, we entered into a license and collaboration agreement with 3B Pharmaceuticals GmbH (“3BP”) to develop a peptide-targeted radionuclide therapy (“PTRT”) and imaging agent targeting fibroblast-activating protein alpha (“FAP”).

Basis of Presentation

All financial information presented includes the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.

The unaudited financial statements of Clovis Oncology, Inc. included herein reflect all adjustments that, in the opinion of management, are necessary to fairly state our financial position, results of operations and cash flows for the periods presented herein. Interim results may not be indicative of the results that may be expected for the full year. Certain information and footnote disclosures normally included in audited financial statements prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) have been condensed or omitted pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”). These financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto which are included in our Annual Report on Form 10-K for the year ended December 31, 2019 (“2019 Form 10-K”) for a broader discussion of our business and the opportunities and risks inherent in such business.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, expenses and revenue and related disclosures. On an ongoing basis, we evaluate our estimates, including estimates related to revenue deductions, intangible asset impairment, clinical trial accruals and share-based compensation expense. We base our estimates on historical experience and other market-specific or other relevant assumptions that we believe to be reasonable under the circumstances. Actual results may differ from those estimates or assumptions.

8

Liquidity

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. 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.

Based on current estimates, we believe that our existing cash, cash equivalents and available-for-sale securities will allow us to fund our operating plan through at least the next 12 months.

2. Summary of Significant Accounting Policies

Recently Adopted Accounting Standards

In June 2016, the FASB issued ASU 2016-13, “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments”. The guidance is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted. We adopted ASU 2016-13 as of January 1, 2020. Upon the adoption of ASU 2016-13 on January 1, 2020, we are required to determine whether a decline in the fair value below the amortized cost basis (i.e., impairment) of an available-for-sale debt is security is due to credit-related factors or noncredit-related factors. Any impairment that is not credit related is recognized in accumulated other comprehensive loss, net of applicable taxes. When evaluating an impairment, entities may not use the length of time a security has been in an unrealized loss position as a factor, either by itself or in combination with other factors, to conclude that a credit loss does not exist. We applied this impairment model for available-for-sale debt securities as of January 1, 2020 and no impairment was recognized upon adoption. In addition, no impairment was recognized for the three and six months ended June 30, 2020. We recognized a minimal allowance for credit losses related to our accounts receivable at June 30, 2020. The adoption of ASU 2016-13 did not materially impact our consolidated financial statements and disclosures.

In August 2018, the FASB issued ASU 2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement”. The guidance is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. We adopted ASU 2018-02 as of January 1, 2020 and there was no material impact on our consolidated financial statements and related disclosures.

Revenue Recognition

We are currently approved to sell Rubraca in the United States and Europe markets. 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 health care providers. Separately, we have arrangements with certain payors and other third parties that provide for government-mandated and privately-negotiated rebates, chargebacks and discounts. 

Product Revenue

Revenue from product sales are recognized when the performance obligation is satisfied, which is when customers obtain control of our product at a point in time, typically upon delivery. We expense incremental costs of obtaining a contract as and when incurred if the expected amortization period of the asset that we would have recognized is one year or less.

Reserves for Variable Consideration

Revenues from product sales are recorded at the net sales price (transaction price), which includes estimates of variable consideration for which reserves are established and which result from price concessions that include rebates, chargebacks, discounts, co-pay assistance, estimated product returns and other allowances that are offered within contracts between us and our customers, health care providers, payors and other indirect customers relating to the sales of our product. These reserves are based on the amounts earned or to be claimed on the related sales and are classified as reductions of accounts receivable (if the amount is payable to the customers) or a current liability (if the amount is

9

payable to a party other than a customer). Where appropriate, these estimates take into consideration a range of possible outcomes which are probability-weighted for relevant factors such as our historical experience, current contractual and statutory requirements, specific known market events and trends, industry data and forecasted customer buying and payment patterns. Overall, these reserves reflect our best estimates of the amount of consideration to which we are entitled based on the terms of the contract. The amount of variable consideration which is included in the transaction price may be constrained and is included in the net sales price only to the extent that it is probable that a significant reversal in the amount of the cumulative revenue recognized will not occur in a future period. Actual amounts of consideration ultimately received may differ from our estimates. If actual results in the future vary from our estimates, we adjust these estimates, which would affect product revenue and earnings in the period such variances become known.

Government Rebates. Rebates include mandated discounts under the Medicaid Drug Rebate Program, the Medicare coverage gap program, the Tricare health program and various European National Health Service, Sick Fund and Clawback programs. Rebates are amounts owed after the final dispensing of products to a benefit plan participant and are based upon contractual agreements or legal requirements with the public-sector benefit providers. These reserves are recorded in the same period the related revenue is recognized, resulting in a reduction of product revenue and the establishment of a current liability which is included in accrued expenses on the Consolidated Balance Sheets. Our rebate estimates are based upon a range of possible outcomes that are probability-weighted for the estimated payor mix. The accrual for rebates is based on the expected utilization from historical data we have accumulated since the Rubraca product launch.

GPO and Payor Rebates. We contract with various private payor organizations and group purchasing organizations (“GPO”), primarily insurance companies, pharmacy benefit managers and hospitals, for the payment of rebates with respect to utilization of our products. We estimate these rebates and record such estimates in the same period the related revenue is recognized, resulting in a reduction of product revenue and the establishment of a current liability.

Chargebacks. Chargebacks are discounts that occur when contracted customers, which currently consist primarily of group purchasing organizations, Public Health Service (“PHS”) organizations and federal government entities purchasing via the Federal Supply Schedule, purchase directly from our specialty distributors at a discounted price. The specialty distributor, in turn, charges back the difference between the price initially paid by the specialty distributor and the discounted price paid to the specialty distributor by the healthcare provider. These reserves are established in the same period that the related revenue is recognized, resulting in a reduction of product revenue and accounts receivable. The accrual for specialty distributor chargebacks is estimated based on known chargeback rates and known sales to specialty distributors adjusted for the estimated utilization by healthcare providers.

Discounts and Fees. Our payment terms are generally 30 days. Specialty distributors and specialty pharmacies are offered various forms of consideration, including service fees and prompt pay discounts for payment within a specified period. We expect these customers will earn prompt pay discounts and therefore, we deduct the full amount of these discounts and service fees from product sales when revenue is recognized.

Co-pay assistance. Patients who have commercial insurance and meet certain eligibility requirements may receive co-pay assistance. The intent of this program is to reduce the patient’s out of pocket costs. Liabilities for co-pay assistance are based on actual program participation provided by third-party administrators at month end.

Returns. Consistent with industry practice, we generally offer customers a right of return limited only to product that will expire in six months or product that is six months beyond the expiration date. To date, we have had minimal product returns and we currently do not have an accrual for product returns. We will continue to assess our estimate for product returns as we gain additional historical experience.

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.

Accounts Receivable

As a result of the adoption of ASU 2016-13, we recognized a minimal allowance for credit losses related to our accounts receivable at June 30, 2020. We provide an allowance for doubtful accounts based on experience and specifically identified risks. Accounts receivable are charged off against the allowance for doubtful accounts when we determine that recovery is unlikely and we cease collection efforts.

Inventory

Inventories are stated at the lower of cost or estimated net realizable value, on a first-in, first-out (“FIFO”) basis. Inventories include active pharmaceutical ingredient (“API”), contract manufacturing costs and overhead allocations. We began capitalizing incurred inventory related costs upon the regulatory approval of Rubraca. Prior to the regulatory approval of Rubraca, we incurred costs for the manufacture of the drug that could potentially be available to support the commercial launch of Rubraca and all such costs were recognized as research and development expense.

We regularly analyze our inventory levels for excess quantities and obsolescence (expiration), taking into account factors such as historical and anticipated future sales compared to quantities on hand and the remaining shelf-life of Rubraca. Rubraca finished goods have a shelf-life of four years from the date of manufacture. We expect to sell the finished goods prior to expiration. The API currently has a shelf-life of four years from the date of manufacture but can be retested at an immaterial cost with no expected reduction in potency, thereby extending its shelf-life as needed. We expect to consume substantially all of the API over a period of approximately six years based on our long-range sales projections of Rubraca.

We write down inventory that has become obsolete, inventory that has a cost basis in excess of its estimated realizable value and/or inventory in excess of expected sales requirements. Expired inventory would be disposed of and the related costs would be written off as cost of product revenue. Inventories that are not expected to be consumed within 12 months following the balance sheet date are classified as long-term inventories. Long-term inventories primarily consist of API.

API is currently produced by Lonza. As the API has undergone significant manufacturing specific to its intended purpose at the point it is purchased by us, we classify the API as work-in-process inventory. In addition, we currently manufacture Rubraca finished goods with a single third-party manufacturer. The disruption or termination of the supply of API or the disruption or termination of the manufacturing of our commercial products could have a material adverse effect on our business, financial position and results of operations. API that is written off due to damage and certain costs related to our dedicated production train at Lonza are included in Other Operating Expenses in the Consolidated Statements of Operations and Comprehensive Loss.

Inventory used in clinical trials is expensed as research and development expense when it has been identified for such use.

Our other significant accounting policies are described in Note 2, Summary of Significant Accounting Policies of the Notes to the Consolidated Financial Statements included in our 2019 Form 10-K.

3. Financial Instruments and Fair Value Measurements

Fair value is defined as the exchange price that would be received to sell an asset or paid to transfer a liability (at exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.

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The three levels of inputs that may be used to measure fair value include:

Level 1:	Quoted prices in active markets for identical assets or liabilities. Our Level 1 assets consist of money market investments and U.S. treasury securities. We do not have Level 1 liabilities.
Level 2:	Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities in active markets or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Our Level 2 assets consist of U.S. treasury securities. We do not have Level 2 liabilities.
Level 3:	Unobservable inputs that are supported by little or no market activity. We do not have Level 3 assets or liabilities that are measured at fair value on a recurring basis.

The following table identifies our assets and liabilities that were measured at fair value on a recurring basis (in thousands):

	Balance		Level 1		Level 2		Level 3
June 30, 2020
Assets:
Money market	$	147,902	$	147,902	$	—	$	—
U.S. treasury securities		—		—		—		—
Total assets at fair value	$	147,902	$	147,902	$	—	$	—
December 31, 2019
Assets:
Money market	$	61,882	$	61,882	$	—	$	—
U.S. treasury securities		189,736		54,910		134,826		—
Total assets at fair value	$	251,618	$	116,792	$	134,826	$	—

There were no liabilities that were measured at fair value on a recurring basis as of June 30, 2020. There were no transfers between the Level 1 and Level 2 categories or into or out of the Level 3 category during three and six months ended June 30, 2020.

Financial instruments not recorded at fair value include our convertible senior notes. At June 30, 2020, the carrying amount of the 2021 Notes was $64.0 million, which represents the aggregate principal amount net of remaining debt issuance costs, and the fair value was $58.2 million. At June 30, 2020, the carrying amount of the 2024 Notes was $147.0 million, which represents the aggregate principal amount net of remaining debt issuance costs, and the fair value was $152.8 million. At June 30, 2020, the carrying amount of the 2025 Notes was $293.6 million, which represents the aggregate principal amount net of remaining debt issuance costs, and the fair value was $180.8 million. The fair value was determined using Level 2 inputs based on the indicative pricing published by certain investment banks or trading levels of these notes, which are not listed on any securities exchange or quoted on an inter-dealer automated quotation system. See Note 10, Long-term Debt for discussion of the convertible senior notes. The carrying amounts of accounts payable and accrued expenses approximate their fair value due to their short-term maturities.

4. Available-for-Sale Securities

We did not have available-for-sale securities as of June 30, 2020.

As of December 31, 2019, available-for-sale securities consisted of the following (in thousands):

			Gross		Gross		Aggregate
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
U.S. treasury securities	$	134,826	$	—	$	—	$	134,826

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5. Inventories

The following table presents current and long-term inventories as of June 30, 2020 and December 31, 2019:

	June 30,		December 31,
	2020		2019
Work-in-process	$	103,871	$	104,139
Finished goods, net		29,317		20,433
Total inventories	$	133,188	$	124,572

At June 30, 2020, we had $26.9 million of current inventory and $106.3 million of long-term inventory.

6. Other Current Assets

Other current assets were comprised of the following (in thousands):

	June 30,		December 31,
	2020		2019
Prepaid insurance	$	1,913	$	505
Prepaid IT		796		698
Prepaid expenses - other		4,235		3,371
Value-added tax ("VAT") receivable		6,364		11,920
Receivable - other		1,111		2,176
Other		96		177
Total	$	14,515	$	18,847

7. Intangible Assets and Goodwill

Intangible assets related to capitalized milestones under license agreements consisted of the following (in thousands):

	June 30,		December 31,
	2020		2019
Intangible asset - milestones	$	79,850	$	71,850
Accumulated amortization		(11,422)		(8,930)
Total intangible asset, net	$	68,428	$	62,920

The increase in our intangible asset – milestones since December 31, 2019 is due to an $8.0 million milestone payment to Pfizer related to the May 2020 FDA approval. See Note 13, License Agreements for further discussion of this approval.

The estimated useful lives of these intangible assets are based on the estimated remaining patent life of Rubraca and extend through 2031 in Europe and 2035 in the U.S.

We recorded amortization expense of $1.3 million and $2.5 million related to capitalized milestone payments during the three and six months ended June 30, 2020, respectively. We recorded amortization expense of $1.2 million and $2.3 million related to capitalized milestone payments during the three and six months ended June 30, 2019, respectively. Amortization expense is included in cost of sales – intangible asset amortization on the Consolidated Statements of Operations and Comprehensive Loss.

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Estimated future amortization expense associated with intangibles is expected to be as follows (in thousands):

2020 (remaining six months)	$	2,686
2021		5,371
2022		5,371
2023		5,371
2024		5,371
Thereafter		44,258
	$	68,428

8. Other Accrued Expenses

Other accrued expenses were comprised of the following (in thousands):

	June 30,		December 31,
	2020		2019
Accrued personnel costs	$	12,101	$	16,915
Accrued interest payable for convertible senior notes		3,900		5,903
Income tax payable		871		3,505
Accrued corporate legal fees and professional services		920		310
Accrued royalties		6,082		6,038
Accrued variable considerations		8,303		5,748
Purchase of API received not yet invoiced		79		—
Accrued expenses - other		5,426		3,809
Total	$	37,682	$	42,228

9. Lease

At the inception of an arrangement, we determine whether the arrangement is or contains a lease based on the unique facts and circumstances. Most leases with a term greater than one year are recognized on the balance sheet as right-of-use assets, lease liabilities and, if applicable, long-term lease liabilities. We elected not to recognize on the balance sheet leases with terms of one year or less. Lease liabilities and their corresponding right-of-use assets are recorded based on the present value of lease payments over the expected lease term. The interest rate implicit in lease contracts is typically not readily determinable. As such, we utilize the appropriate incremental borrowing rate, which is the rate incurred to borrow on a collateralized basis over a similar term at an amount equal to the lease payments in a similar economic environment. Certain adjustments to the right-of-use asset may be required for items such as initial direct costs paid or incentives received.

The components of a lease should be split into three categories: lease components (e.g. land, building, etc.), non-lease components (e.g. common area maintenance, maintenance, consumables, etc.) and non-components (e.g. property taxes, insurance, etc.). Then the fixed and in-substance fixed contract consideration (including any related to non-components) must be allocated based on fair values assigned to the lease components and non-lease components.

Our facilities operating leases have lease components, non-lease components and non-components, which we have separated because the non-lease components and non-components have variable lease payments and are excluded from the measurement of the lease liabilities. The lease component results in a right-of-use asset being recorded on the balance sheet and amortized as lease expense on a straight-line basis to the statements of operations.

We lease all of our office facilities in the U.S. and Europe. Leases with an initial term of 12 months or less are not recorded on the balance sheet; we recognize lease expense for these leases on a straight-line basis over the lease term. Most leases include one or more options to renew. The exercise of lease renewal options is at our sole discretion. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants.

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We have a finance lease for certain equipment at the dedicated production train at Lonza, our non-exclusive manufacturer of the Rubraca API.

The components of lease expense and related cash flows were as follows (in thousands):

	Three months ended June 30,		Three months ended June 30,
	2020		2019
Lease cost
Finance lease cost:
Amortization of right-of-use assets	$	474	$	356
Interest on lease liabilities		208		179
Operating lease cost		998		994
Short-term lease cost		116		48
Variable lease cost		472		645
Total lease cost	$	2,268	$	2,222
Operating cash flows from finance leases	$	208	$	179
Operating cash flows from operating leases	$	998	$	994
Financing cash flows from finance leases	$	364	$	255

	Six months ended June 30,		Six months ended June 30,
	2020		2019
Lease cost
Finance lease cost:
Amortization of right-of-use assets	$	947	$	712
Interest on lease liabilities		423		363
Operating lease cost		2,124		2,144
Short-term lease cost		222		97
Variable lease cost		1,070		1,369
Total lease cost	$	4,786	$	4,685
Operating cash flows from finance leases	$	423	$	363
Operating cash flows from operating leases	$	2,124	$	2,144
Financing cash flows from finance leases	$	720	$	505

The weighted-average remaining lease term and weighted-average discount rate were as follows:

	June 30, 2020		June 30, 2019
Weighted-average remaining lease term (years)
Operating leases		7.0		6.8
Finance leases		5.5		6.5
Weighted-average discount rate
Operating leases		8%		8%
Finance leases		8%		8%

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Future minimum commitments due under these lease agreements as of June 30, 2020 are as follows (in thousands):

	Operating Leases		Finance Leases		Total
2020 (remaining six months)		2,814		1,143		3,957
2021		5,628		2,287		7,915
2022		5,177		2,287		7,464
2023		4,791		2,287		7,078
2024		4,798		2,287		7,085
Thereafter		14,619		2,287		16,906
Present value adjustment		(9,162)		(2,429)		(11,591)
Present value of lease payments	$	28,665	$	10,149	$	38,814

10. Long-term Debt

The following is a summary of our convertible senior notes at June 30, 2020:

		Principal Amount
	Interest Rate		(in thousands)	Due Date
2021 Notes	2.50%	$	64,418	September 15, 2021
2024 Notes	4.50%		150,624	August 1, 2024
2025 Notes	1.25%		300,000	May 1, 2025
Total		$	515,042

2021 Notes

In September 2014, we completed a private placement of $287.5 million aggregate principal amount of 2.5% convertible senior notes due 2021 (the “2021 Notes”) resulting in net proceeds of $278.3 million after deducting offering expenses. In accordance with the accounting guidance, the conversion feature did not meet the criteria for bifurcation, and the entire principal amount was recorded as a long-term liability on the Consolidated Balance Sheets.

The 2021 Notes are governed by the terms of the indenture between the Company, as issuer, and The Bank of New York Mellon Trust Company, N.A., as trustee. The 2021 Notes are senior unsecured obligations and bear interest at a rate of 2.5% per year, payable semi-annually in arrears on March 15 and September 15 of each year. The 2021 Notes will mature on September 15, 2021, unless earlier converted, redeemed or repurchased.

Holders may convert all or any portion of the 2021 Notes at any time prior to the close of business on the business day immediately preceding the maturity date. Upon conversion, the holders will receive shares of our common stock at an initial conversion rate of 16.1616 shares per $1,000 in principal amount of 2021 Notes, equivalent to a conversion price of approximately $61.88 per share. The conversion rate is subject to adjustment upon the occurrence of certain events described in the indenture. In addition, following certain corporate events that occur prior to the maturity date or upon our issuance of a notice of redemption, we will increase the conversion rate for holders who elect to convert the 2021 Notes in connection with such a corporate event or during the related redemption period in certain circumstances.

On or after September 15, 2018, we may redeem the 2021 Notes, at our option, in whole or in part, if the last reported sale price of our common stock has been at least 150% of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period ending not more than two trading days preceding the date on which we provide written notice of redemption at a redemption price equal to 100% of the principal amount of the 2021 Notes to be redeemed plus accrued and unpaid interest to, but excluding, the redemption date. No sinking fund is provided for the 2021 Notes.

If we undergo a fundamental change, as defined in the indenture, prior to the maturity date of the 2021 Notes, holders may require us to repurchase for cash all or any portion of the 2021 Notes at a fundamental change repurchase price equal to 100% of the principal amount of the 2021 Notes to be repurchased, plus accrued and unpaid interest to, but excluding, the fundamental change repurchase date.

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The 2021 Notes rank senior in right of payment to any of our indebtedness that is expressly subordinated in right of payment to the 2021 Notes; equal in right of payment to all of our liabilities that are not so subordinated; effectively junior in right of payment to any secured indebtedness to the extent of the value of the assets securing such indebtedness; and structurally junior to all indebtedness and other liabilities (including trade payables) of our subsidiaries.

In connection with the issuance of the 2021 Notes, we incurred $9.2 million of debt issuance costs, of which $2.0 million of unamortized debt issuance costs were derecognized in connection with the repurchase of the 2021 Notes. The remaining debt issuance costs are presented as a deduction from the convertible senior notes on the Consolidated Balance Sheets and are amortized as interest expense over the expected life of the 2021 Notes using the effective interest method. We determined the expected life of the debt was equal to the seven-year term of the 2021 Notes.

In August 2019, we entered into privately negotiated transactions with a limited number of holders to repurchase $190.3 million aggregate principal amount of our outstanding 2021 Notes for an aggregate repurchase price of $171.8 million, including accrued interest. This repurchase resulted in the recognition of $18.5 million gain on extinguishment of debt.

In April 2020, we entered into a privately negotiated exchange agreement with a holder (“Holder”) of our 2021 Notes, pursuant to which we issued to such Holder of the 2021 Notes approximately $36.1 million in aggregate principal amount (the “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 (the “Exchange Transaction”), which resulted in a $3.3 million loss on extinguishment of debt. We did not receive any cash proceeds from the Exchange Transaction.

2024 Notes

In August 2019, we completed a private placement to qualified institutional buyers of $263.0 million aggregate principal amount of 4.50% convertible senior notes due 2024 (the “2024 Notes”) resulting in net proceeds of $254.9 million, after deducting underwriting discounts and commissions and offering expenses. In accordance with the accounting guidance, the conversion feature did not meet the criteria for bifurcation, and the entire principal amount was recorded as a long-term liability on the Consolidated Balance Sheets.

The 2024 Notes are governed by the terms of the indenture between the Company, as issuer, and The Bank of New York Mellon Trust Company, N.A., as trustee. The 2024 Notes are senior unsecured obligations and bear interest at a rate of 4.50% per year, payable semi-annually in arrears on February 1 and August 1 of each year. The 2024 Notes will mature on August 1, 2024, unless earlier repurchased or converted.

Holders may convert all or any portion of the 2024 Notes at any time prior to the close of business on the business day immediately preceding the maturity date. Upon conversion, the holders will receive shares of our common stock at an initial conversion rate of 137.2213 shares per $1,000 in principal amount of 2024 Notes, equivalent to a conversion price of approximately $7.29 per share. The conversion rate is subject to adjustment upon the occurrence of certain events described in the indenture. In addition, following certain corporate events that occur prior to the maturity date or upon our issuance of a notice of redemption, we will increase the conversion rate for holders who elect to convert the 2024 Notes in connection with such a corporate event or during the related redemption period in certain circumstances.

We will not have the right to redeem the 2024 Notes prior to their maturity. If we undergo a fundamental change, as defined in the indenture, prior to the maturity date of the 2024 Notes, holders may require us to repurchase for cash all or any portion of the 2024 Notes at a fundamental change repurchase price equal to 100% of the principal amount of the 2024 Notes to be repurchased, plus accrued and unpaid interest to, but excluding, the fundamental change repurchase date. No sinking fund is provided for the 2024 Notes.

The 2024 Notes rank senior in right of payment to any of our indebtedness that is expressly subordinated in right of payment to the 2024 Notes; equal in right of payment to all of our liabilities that are not so subordinated, including the 2021 Notes and 2025 Notes; effectively junior in right of payment to any secured indebtedness to the extent of the value of the assets securing such indebtedness, including our borrowing under the TPG financing agreement; and structurally junior to all indebtedness and other liabilities (including trade payables) of our subsidiaries.

In connection with the issuance of the 2024 Notes, we incurred $8.0 million of debt issuance costs. The debt issuance costs are presented as a deduction from the convertible senior notes on the Consolidated Balance Sheets and are

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amortized as interest expense over the expected life of the 2024 Notes using the effective interest method. We determined the expected life of the debt was equal to the five-year term of the 2024 Notes.

In January 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. We used the proceeds of the share offering to repurchase 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. As a result of this transaction, $3.6 million of unamortized debt issuance costs were derecognized and we recognized a $7.8 million loss on the transactions.

In April 2020, we completed the Exchange Transaction discussed in the 2021 Notes section above.

The Additional 2024 Notes issued in the Exchange Transaction were issued as Additional Notes under that certain Indenture, dated as of August 13, 2019 (the “Indenture”), by and between the Company and The Bank of New York Mellon Trust Company, N.A., as trustee, and have substantially identical terms to our currently outstanding 2024 Notes, except that the Additional 2024 Notes will accrue interest from February 1, 2020 and the initial interest payment date on the Additional 2024 Notes will be August 1, 2020. The Holder paid to the Company accrued interest on the Additional 2024 Notes from February 1, 2020 to and including April 20, 2020. The Additional 2024 Notes will be treated as a single series of securities with the currently outstanding 2024 Notes.

In April and May 2020, approximately $24.3 million in principal amount of 2024 Notes were converted into 3,331,870 shares of our common stock at the conversion rate of 137.2213 shares per $1,000 in principal amount of 2024 Notes.

2025 Notes

In April 2018, we completed an underwritten public offering of $300.0 million aggregate principal amount of 1.25% convertible senior notes due 2025 (the “2025 Notes”) resulting in net proceeds of $290.9 million, after deducting underwriting discounts and commissions and offering expenses. In accordance with the accounting guidance, the conversion feature did not meet the criteria for bifurcation, and the entire principal amount was recorded as a long-term liability on the Consolidated Balance Sheets.

The 2025 Notes are governed by the terms of the indenture between the Company, as issuer, and The Bank of New York Mellon Trust Company, N.A., as trustee, as supplemented by the terms of that certain first supplemental indenture thereto. The 2025 Notes are senior unsecured obligations and bear interest at a rate of 1.25% per year, payable semi-annually in arrears on May 1 and November 1 of each year. The 2025 Notes will mature on May 1, 2025, unless earlier converted, redeemed or repurchased.

Holders may convert all or any portion of the 2025 Notes at any time prior to the close of business on the business day immediately preceding the maturity date. Upon conversion, the holders will receive shares of our common stock at an initial conversion rate of 13.1278 shares per $1,000 in principal amount of 2025 Notes, equivalent to a conversion price of approximately $76.17 per share. The conversion rate is subject to adjustment upon the occurrence of certain events described in the indenture. In addition, following certain corporate events that occur prior to the maturity date or upon our issuance of a notice of redemption, we will increase the conversion rate for holders who elect to convert the 2025 Notes in connection with such a corporate event or during the related redemption period in certain circumstances.

On or after May 2, 2022, we may redeem the 2025 Notes, at our option, in whole or in part, if the last reported sale price of our common stock has been at least 150% of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period ending not more than two trading days preceding the date on which we provide written notice of redemption at a redemption price equal to 100% of the principal amount of the 2025 Notes to be redeemed plus accrued and unpaid interest to, but excluding, the redemption date. No sinking fund is provided for the 2025 Notes.

If we undergo a fundamental change, as defined in the indenture, prior to the maturity date of the 2025 Notes, holders may require us to repurchase for cash all or any portion of the 2025 Notes at a fundamental change repurchase price equal to 100% of the principal amount of the 2025 Notes to be repurchased, plus accrued and unpaid interest to, but excluding, the fundamental change repurchase date.

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The 2025 Notes rank senior in right of payment to any of our indebtedness that is expressly subordinated in right of payment to the 2025 Notes; equal in right of payment to all of our liabilities that are not so subordinated, including the 2021 Notes; effectively junior in right of payment to any secured indebtedness to the extent of the value of the assets securing such indebtedness; and structurally junior to all indebtedness and other liabilities (including trade payables) of our subsidiaries.

In connection with the issuance of the 2025 Notes, we incurred $9.1 million of debt issuance costs. The debt issuance costs are presented as a deduction from the convertible senior notes on the Consolidated Balance Sheets and are amortized as interest expense over the expected life of the 2025 Notes using the effective interest method. We determined the expected life of the debt was equal to the seven-year term of the 2025 Notes.

As of June 30, 2020 and December 31, 2019, the balance of unamortized debt issuance costs related to the 2021 Notes, 2024 Notes and 2025 Notes was $10.4 million and $15.4 million, respectively.

TPG Financing Agreement

On May 1, 2019, we entered into a financing agreement (the “Financing Agreement”) with certain affiliates of TPG Sixth Street Partners, LLC (“TPG”) in which we plan to borrow from TPG amounts required to reimburse our actual costs and expenses incurred during each fiscal quarter (limited to agreed budgeted amounts), as such expenses are incurred, related to the ATHENA clinical trial, in an aggregate amount of up to $175 million (the amount actually borrowed, the “Borrowed Amount”). ATHENA is our largest clinical trial, with a planned target enrollment of 1,000 patients across more than 270 sites in at least 25 countries. The Clovis-sponsored phase 3 ATHENA study in advanced ovarian cancer is the first-line maintenance treatment setting evaluating Rubraca plus nivolumab (PD-1 inhibitor), Rubraca, nivolumab and a placebo in newly-diagnosed patients who have completed platinum-based chemotherapy. This study initiated in the second quarter of 2018 and we completed target enrollment during the second quarter of 2020.

We incur borrowings under the Financing Agreement on a quarterly basis, beginning with such expenses incurred during the quarter ended March 31, 2019 and ending generally on the earliest to occur of (i) the termination of the ATHENA Trial, (ii) the date of completion of all activities under the ATHENA Trial Clinical Study Protocol, (iii) the date on which we pay the Discharge Amount (as defined in the Financing Agreement), (iv) the date of the occurrence of a change of control of us (or a sale of all or substantially all of our assets related to Rubraca) or our receipt of notice of certain breaches by us of our obligations under material in-license agreements related to Rubraca and (v) September 30, 2022.

We are obligated to repay on a quarterly basis, beginning on the earliest to occur of (i) the termination of the ATHENA Trial, (ii) the approval by the FDA of an update to the label portion of the Rubraca new drug application (“NDA”) to include in such label the treatment of an indication resulting from the ATHENA Trial, (iii) the date on which we determine that the results of the ATHENA Trial are insufficient to achieve such an expansion of the Rubraca label to cover an indication based on the ATHENA Trial and (iv) September 30, 2022 (the “Repayment Start Date”).

● 9.75% (which rate may be increased incrementally up to approximately 10.25% in the event the Borrowed Amount exceeds $166.5 million) of the direct Rubraca net sales recorded by us and our subsidiaries worldwide and our future out-licensees in the United States, if any, during such quarter;

● 19.5% of any royalty payments received by us and our subsidiaries during such quarter based on the sales of Rubraca by our future out-licensees outside the United States, if any; and

● 19.5% of any other amounts received by us and our subsidiaries in connection with any other commercialization arrangement for Rubraca, including any upfront and milestone payments and proceeds of infringement claims (which payments are not subject to the caps described below).

Quarterly payments are capped at $8.5 million, unless the label portion of the Rubraca NDA is expanded by the FDA to include such label the treatment of an indication resulting from the ATHENA Trial, in which case the quarterly payment is capped at $13.5 million. In the event the aggregate Borrowed Amount exceeds $166.5 million, such quarterly limits will be incrementally increased to a maximum of approximately $8.94 million and $14.19 million, respectively. The maximum amount required to be repaid under the agreement is two times the aggregate Borrowed Amount, which may be $350 million in the event we borrow the full $175 million under the Financing Agreement.

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In the event we have not made payments on or before December 30, 2025 equal to at least the Borrowed Amount, we are required to make a lump sum payment in an amount equal to such Borrowed Amount less the aggregate of all prior quarterly payments described above. All other payments are contingent on the performance of Rubraca. There is no final maturity date on the Financing Agreement.

Our obligations under the Financing Agreement are secured under a Pledge and Security agreement by a first priority security interest in all of our assets related to Rubraca, including intellectual property rights and a pledge of the equity of our wholly owned subsidiaries, Clovis Oncology UK Limited and Clovis Oncology Ireland Limited. In addition, the obligations are guaranteed by Clovis Oncology UK Limited and Clovis Oncology Ireland Limited, secured by a first priority security interest in all the assets of those subsidiaries.

Pursuant to the Financing Agreement, we have agreed to certain limitations on our operations, including limitations on making certain restricted junior payments, including payment of dividends, limitation on liens and certain limitations on the ability of our non-guarantor subsidiaries to own certain assets related to Rubraca and to incur indebtedness.

We may terminate the Financing Agreement at any time by paying the lenders an amount (the “Discharge Amount”) equal to the sum of (a) (A) the greater of (x) the Borrowed Amount plus (i) if such date is during calendar year 2019, $35 million or (ii) if such date is during calendar year 2020 or thereafter, $50 million and (y) (i) if such date is prior to the Repayment Start Date, 1.75 times the Borrowed Amount or (ii) if such date is after the Repayment Start Date, 2.00 times the Borrowed Amount minus (B) the aggregate amount of all quarterly payments previously paid to the lenders plus (b) all other obligations which have accrued but which have not been paid under the loan documents, including expense reimbursement.

In the event of (i) a change of control of us, we must pay the Discharge Amount to the lenders and (ii) an event of default under the Financing Agreement (which includes, among other events, breaches or defaults under or terminations of our material in-license agreements related to Rubraca and defaults under our other material indebtedness), the lenders have the right to declare the Discharge Amount to be immediately due and payable.

For the six months ended June 30, 2020, we recorded $72.5 million as a long-term liability on the Consolidated Balance Sheets and future quarterly draws will be recorded as a long-term liability on the Consolidated Balance Sheets. In connection with the transaction, we incurred $1.8 million of debt issuance costs. The debt issuance costs are presented as a deduction from the TPG financing liability on the Consolidated Balance Sheets and are amortized as interest expense over the expected life of the Financing Agreement using the straight-line method. As of June 30, 2020, the balance of unamortized debt issuance costs was $1.6 million.

For the six months ended June 30, 2020, we used an effective interest rate of 14.5%. For subsequent periods, we will use the prospective method whereby a new effective interest rate is determined based on the revised estimate of remaining cash flows. The new rate is the discount rate that equates the present value of the revised estimate of remaining cash flows with the carrying amount of the debt, and it will be used to recognize interest expense for the remaining periods. Under this method, the effective interest rate is not constant, and any change in expected cash flows is recognized prospectively as an adjustment to the effective yield.

The following table sets forth total interest expense recognized during the three and six months ended June 30, 2020 and 2019 (in thousands):

	Three months ended June 30,				Six months ended June 30,
	2020		2019		2020		2019
Interest on convertible notes	$	2,811	$	2,734	$	5,994	$	5,469
Amortization of debt issuance costs		637		679		1,423		1,324
Debt issuance cost derecognized related to convertible debt transactions		789		—		4,344		—
Interest on finance lease		208		179		423		363
Interest on borrowings under financing agreement		2,264		199		4,055		199
Other interest		30		26		61		52
Total interest expense	$	6,739	$	3,817	$	16,300	$	7,407

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11. Stockholders’ Equity

Common Stock

In May 2020, we sold 11,090,000 shares of our common stock in a public offering at $8.05 per share. The net proceeds from the offering were $82.8 million, after deducting underwriting discounts and commissions and offering expenses.

The holders of common stock are entitled to one vote per share on all matters to be voted upon by our stockholders. Subject to the preferences that may be applicable to any outstanding shares of preferred stock, the holders of common stock are entitled to receive ratably such dividends, if any, as may be declared by our Board of Directors.

Accumulated Other Comprehensive Loss

Accumulated other comprehensive loss consists of changes in foreign currency translation adjustments, which includes changes in a subsidiary’s functional currency, and unrealized gains and losses on available-for-sale securities.

The changes in accumulated balances related to each component of other comprehensive income (loss) are summarized for the three months ended June 30, 2020 and 2019, as follows (in thousands):

	Foreign Currency				Unrealized				Total Accumulated
	Translation Adjustments				(Losses) Gains				Other Comprehensive Loss
	2020		2019		2020		2019		2020		2019
Balance at April 1,	$	(44,835)	$	(44,465)	$	(55)	$	(99)	$	(44,890)	$	(44,564)
Other comprehensive income (loss)		61		(1)		(84)		77		(23)		76
Total before tax		(44,774)		(44,466)		(139)		(22)		(44,913)		(44,488)
Tax effect		—		—		—		—		—		—
Balance at June 30,	$	(44,774)	$	(44,466)	$	(139)	$	(22)	$	(44,913)	$	(44,488)

The changes in accumulated balances related to each component of other comprehensive income (loss) are summarized for the six months ended June 30, 2020 and 2019, as follows (in thousands):

	Foreign Currency				Unrealized				Total Accumulated
	Translation Adjustments				(Losses) Gains				Other Comprehensive Loss
	2020		2019		2020		2019		2020		2019
Balance at January 1,	$	(44,732)	$	(44,460)	$	(133)	$	(174)	$	(44,865)	$	(44,634)
Other comprehensive (loss) income		(42)		(6)		(6)		152		(48)		146
Total before tax		(44,774)		(44,466)		(139)		(22)		(44,913)		(44,488)
Tax effect		—		—		—		—		—		—
Balance at June 30,	$	(44,774)	$	(44,466)	$	(139)	$	(22)	$	(44,913)	$	(44,488)

There were no reclassifications out of accumulated other comprehensive loss in each of the three and six months ended June 30, 2020 and 2019.

12. Share-Based Compensation

Share-based compensation expense for all equity-based programs, including stock options, restricted stock units and the employee stock purchase plan, for the three and six months ended June 30, 2020 and 2019 was recognized in the accompanying Consolidated Statements of Operations and Comprehensive Loss as follows (in thousands):

	Three months ended June 30,				Six months ended June 30,
	2020		2019		2020		2019
Research and development	$	6,636	$	6,633	$	13,561	$	13,244
Selling, general and administrative		6,677		7,497		12,713		14,525
Total share-based compensation expense	$	13,313	$	14,130	$	26,274	$	27,769

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We did not recognize a tax benefit related to share-based compensation expense during the three and six months ended June 31, 2020 and 2019, as we maintain net operating loss carryforwards and have established a valuation allowance against the entire net deferred tax asset as of June 30, 2020.

Stock Options

The following table summarizes the activity relating to our options to purchase common stock for the six months ended June 30, 2020:

				Weighted
		Weighted		Average	Aggregate
		Average		Remaining	Intrinsic
	Number of	Exercise		Contractual	Value
	Options	Price		Term (Years)	(Thousands)
Outstanding at December 31, 2019	6,287,025	$	42.24
Granted	870,492		7.61
Exercised	(24,153)		3.08
Forfeited	(346,100)		48.18
Outstanding at June 30, 2020	6,787,264	$	37.63	6.1	$	851
Vested and expected to vest at June 30, 2020	6,606,555	$	38.12	6.0	$	806
Vested and exercisable at June 30, 2020	4,912,792	$	44.14	5.0	$	350

The aggregate intrinsic value in the table above represents the pretax intrinsic value, based on our closing stock price of $6.75 as of June 30, 2020, which would have been received by the option holders had all option holders with in-the-money options exercised their options as of that date.

The following table summarizes information about our stock options as of and for the three and six months ended June 30, 2020 and 2019 (in thousands, except per share amounts):

	Three months ended June 30,				Six months ended June 30,
	2020		2019		2020		2019
Weighted-average grant date fair value per share	$	5.06	$	11.33	$	5.87	$	15.81
Intrinsic value of options exercised	$	87	$	198	$	91	$	963
Cash received from stock option exercises	$	72	$	222	$	74	$	1,316

As of June 30, 2020, the unrecognized share-based compensation expense related to unvested options, adjusted for expected forfeitures, was $28.2 million and the estimated weighted-average remaining vesting period was 1.8 years.

Restricted Stock

The following table summarizes the activity relating to our unvested restricted stock units (“RSUs”) for the six months ended June 30, 2020:

		Weighted
		Average
	Number of	Grant Date
	Units	Fair Value
Unvested at December 31, 2019	2,171,347	$	28.37
Granted	2,392,428		8.27
Vested	(775,784)		28.10
Forfeited	(276,398)		19.18
Unvested at June 30, 2020	3,511,593	$	15.46
Expected to vest after June 30, 2020	(3,351,795)	$	14.97

As of June 30, 2020, the unrecognized share-based compensation expense related to unvested RSUs, adjusted for expected forfeitures, was $49.1 million and the estimated weighted-average remaining vesting period was 2.3 years.

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13. License Agreements

Rucaparib

In June 2011, we entered into a license agreement with Pfizer, Inc. (“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.

On August 30, 2016, we entered into a first amendment to the worldwide license agreement with Pfizer, which amends the June 2011 existing worldwide license agreement to permit us to defer payment of the milestone payments payable upon (i) FDA approval of an NDA for 1^st Indication in US and (ii) EMA approval of an MAA for 1^st Indication in the EU, to a date that is 18 months after the date of achievement of such milestones.

On December 19, 2016, Rubraca received its initial FDA approval. This approval resulted in a $0.75 million milestone payment to Pfizer as required by the license agreement, which was paid in the first quarter of 2017. This FDA approval also resulted in an obligation to pay a $20.0 million milestone payment, for which we exercised the option to defer payment by agreeing to pay $23.0 million within 18 months after the date of the FDA approval. We paid the $23.0 million milestone payment in June 2018.

In April, 2018, Rubraca received a second FDA approval. This approval resulted in an obligation to pay a $15.0 million milestone payment, which we paid in April 2018.

In May 2018, Rubraca received its initial European Commission marketing authorization. This approval resulted in an obligation to pay a $20.0 million milestone payment, which we paid in June 2018.

In January 2019, Rubraca received a second European Commission approval. This approval resulted in an obligation to pay a $15.0 million milestone payment, which we paid in February 2019.

In June 2019, we paid a $0.75 million milestone payment due to the launch of Rubraca as maintenance therapy in Germany in March 2019.

In May 2020, Rubraca received a third FDA approval for Rubraca as a monotherapy treatment of adult patients with BRCA1/2-mutant recurrent, metastatic castrate-resistant prostate cancer. This approval resulted in an obligation to pay an $8.0 million milestone payment, which we paid in June 2020.

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.

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In April 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.

Lucitanib

On November 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 of November 19, 2013 (the “Stock Purchase Agreement”), by and among the Company, EOS, its shareholders (the “Sellers”) and Sofinnova 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. 

In October 2008, Ethical Oncology Science, S.p.A. (“EOS”) (now known as Clovis Oncology Italy S.r.l.) entered into an exclusive license agreement with Advenchen Laboratories LLC (“Advenchen”) to develop and commercialize lucitanib on a global basis, excluding China.

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.

FAP Program

In September 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 signing of the license and collaboration agreement in September 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

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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.

In February 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 effective December 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.

Pursuant to terms of each of our product license agreements, we will pay royalties to our licensors on sales, if any, of the respective products.

14. Net Loss Per Common Share

Basic net loss per share is calculated by dividing net loss by the weighted-average number of common shares outstanding during the period. Diluted net loss per share is computed by dividing net loss by the weighted-average number of common share equivalents outstanding using the treasury-stock method for the stock options and RSUs and the if-converted method for the 2021 Notes, 2025 Notes and 2024 Notes. As a result of our net losses for the periods presented, all potentially dilutive common share equivalents were considered anti-dilutive and were excluded from the computation of diluted net loss per share.

The shares outstanding at the end of the respective periods presented in the table below were excluded from the calculation of diluted net loss per share due to their anti-dilutive effect (in thousands):

	Three and six months ended June 30,
	2020	2019
Common shares under option plans	4,156	3,133
Convertible senior notes	25,648	8,584
Total potential dilutive shares	29,804	11,717

15. Commitments and Contingencies

Royalty and License Fee Commitments

We have entered into certain license agreements, as identified in Note 13, License Agreements, with third parties that include the payment of development and regulatory milestones, as well as royalty payments, upon the achievement of pre-established development, regulatory and commercial targets. Our payment obligation related to these license agreements is contingent upon the successful development, regulatory approval and commercialization of the licensed products. Due to the nature of these arrangements, the future potential payments are inherently uncertain, and accordingly, we only recognize payment obligations which are probable and estimable as of the balance sheet date.

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Manufacture and Services Agreement Commitments

On October 3, 2016, we entered into a Manufacturing and Services Agreement (the “Agreement”) with a non-exclusive third-party supplier for the production of the active ingredient for Rubraca. Under the terms of the Agreement, we will provide the third-party supplier a rolling forecast for the supply of the active ingredient in Rubraca that will be updated by us on a quarterly basis. We are obligated to order material sufficient to satisfy an initial quantity specified in a forecast. In addition, the third-party supplier will construct, in its existing facility, a production train that will be exclusively dedicated to the manufacture of the Rubraca active ingredient. We are obligated to make scheduled capital program fee payments toward capital equipment and other costs associated with the construction of the dedicated production train. Further, once the facility is operational, we are obligated to pay a fixed facility fee each quarter for the duration of the Agreement, which expires on December 31, 2025, unless extended by mutual consent of the parties. As of June 30, 2020, $74.5 million of purchase commitments exist under the Agreement.

At the time we entered into the Agreement, we evaluated the Agreement as a whole and bifurcated into lease and non-lease components, which consisted of an operating lease of warehouse space, capital lease of equipment, purchase of leasehold improvements and manufacturing costs based upon the relative fair values of each of the deliverables. During October 2018, the production train was placed into service and we recorded the various components of the Agreement.

Legal Proceedings

We and certain of our officers were named as defendants in several lawsuits, as described below. We cannot reasonably predict the outcome of these legal proceedings, nor can we estimate the amount of loss or range of loss, if any, that may result. An adverse outcome in these proceedings could have a material adverse effect on our results of operations, cash flows or financial condition.

Rociletinib-Related Litigation

Following Clovis’ regulatory announcement in November 2015 of adverse developments in its ongoing clinical trials for rociletinib, Clovis and certain of its current and former executives were named in various securities lawsuits, the largest of which was a putative class action lawsuit in the District of Colorado (the “Medina Action”) which was settled on October 26, 2017 (the “Medina Settlement”). The remaining actions are discussed below.

In March 2017, two putative shareholders of the Company, Macalinao and McKenry (the “Derivative Plaintiffs”), filed shareholder derivative complaints against certain directors and officers of the Company in the Court of Chancery of the State of Delaware. On May 4, 2017, the Macalinao and McKenry actions were consolidated for all purposes in a single proceeding under the caption In re Clovis Oncology, Inc. Derivative Litigation, Case No, 2017-0222 (the “Consolidated Derivative Action”).  

On May 18, 2017, the Derivative Plaintiffs filed a Consolidated Verified Shareholder Derivative Complaint (the “Consolidated Derivative Complaint”). The Consolidated Derivative Complaint generally alleged that the defendants breached their fiduciary duties owed to the Company by allegedly causing or allowing misrepresentations of the Company’s business operations and prospects, failing to ensure that the TIGER-X clinical trial was being conducted in accordance with applicable rules, regulations and protocols, and engaging in insider trading. The Consolidated Derivative Complaint sought, among other things, an award of money damages.  

On July 31, 2017, the defendants filed a motion to dismiss the Consolidated Derivative Complaint. Plaintiffs filed an opposition to the motion to dismiss on August 31, 2017, and the defendants filed a reply in further support of the motion to dismiss on September 26, 2017.

While the motion to dismiss remained pending, on November 19, 2018, Plaintiffs filed a motion for leave to file a supplemental consolidated complaint, and on November 20, 2018, the Court granted that motion. On November 27, 2018, Plaintiffs filed their supplemental complaint (the “Supplemental Derivative Complaint”), which adds allegations concerning the Company’s, Mr. Mahaffy’s and Mr. Mast’s settlements with the United States Securities and Exchange Commission. Pursuant to a briefing schedule entered by the Court, the defendants filed a supplemental motion to dismiss the Supplemental Derivative Complaint on February 6, 2019; plaintiffs filed an opposition brief on February 22, 2019; and the defendants filed a reply brief on March 5, 2019. The Court held oral arguments on the defendants’ motions to

26

dismiss on June 19, 2019. At the oral arguments, the Court ordered the parties to submit supplemental letter briefs on the motion to dismiss.

On October 1, 2019, Vice Chancellor Joseph R. Slights III of the Delaware Chancery Court, issued a Memorandum Opinion granting in part and denying in part defendants’ motions to dismiss. The Supplemental Derivative Complaint was dismissed as to Plaintiffs’ derivative claims for unjust enrichment and insider trading. The Court allowed Plaintiffs’ remaining derivative claim for breach of fiduciary duty to proceed. Defendants filed an answer to the Supplemental Derivative Complaint on December 27, 2019.

On December 17, 2019, the parties participated in a mediation, which did not result in a settlement. On December 22, 2019, the Company’s board of directors formed a Special Litigation Committee (the “SLC”) to conduct an investigation of the claims asserted in the Supplemental Derivative Complaint. On February 18, 2020, the SLC moved to stay all proceedings in the Consolidated Derivative Action pending completion of its investigation. Plaintiffs filed their opposition to the motion to stay on March 3, 2020 and the SLC filed its reply on March 13, 2020. On May 12, 2020, after hearing oral argument, Vice Chancellor Slights granted the SLC’s motion to stay proceedings until September 18, 2020 so that the SLC may complete its investigation.

While the SLC’s investigation remains ongoing, the Company does not believe this litigation will have a material impact on its financial position or results of operations.

On March 20, 2017, a purported shareholder of the Company, filed a shareholder derivative complaint (the “Guo Complaint”) against certain officers and directors of the Company in the United States District Court for the District of Colorado. The Guo Complaint generally alleged that the defendants breached their fiduciary duties owed to the Company by either recklessly or with gross negligence approving or permitting misrepresentations of the Company’s business operations and prospects. The Guo Complaint also alleged claims for waste of corporate assets and unjust enrichment. Finally, the Guo Complaint alleged that certain of the individual defendants violated Section 14(a) of the Securities Exchange Act, by allegedly negligently issuing, causing to be issued, and participating in the issuance of materially misleading statements to stockholders in the Company’s Proxy Statement on Schedule DEF 14A in connection with the 2015 Annual Meeting of Stockholders, held on June 11, 2015. The Guo Complaint sought, among other things, an award of money damages.  

On June 19, 2017, the parties filed a joint motion to stay the Guo action pending resolution of the motion to dismiss the Consolidated Derivative Complaint. On June 20, 2017, the court granted the motion to stay. Based on the October 1, 2019 ruling in the Consolidated Derivative Action, on October 22, 2019, the court lifted the stay. The parties participated in a scheduling conference on December 9, 2019, following which the court set the dates for pre-trial conference and trial for March 2, 2021 and March 29, 2021, respectively. On December 23, 2019, the plaintiff filed an amended complaint, and on February 7, 2020, the plaintiff filed a second amended complaint. On February 28, 2020, the defendants moved to dismiss the second amended Guo complaint. The plaintiff filed an opposition to the motion to dismiss on March 20, 2020 and the defendants filed their reply on April 3, 2020.

The Company intends to vigorously defend against the allegations in the second amended Guo complaint, but there can be no assurance that the defense will be successful.

European Patent Opposition

Oppositions were filed in the granted European counterparts of two patents in the rucaparib camsylate salt/polymorph patent family. An opposition of European patent 2534153 was filed by two opponents on June 20, 2017. The European Patent Office’s Opposition Division held an oral hearing on December 4, 2018, during which it upheld claims, narrowed from the originally granted patent, to certain crystalline forms of rucaparib camsylate, including, but not limited to, rucaparib S-camsylate Form A, the crystalline form in Rubraca. Clovis and one opponent, Hexal, appealed the written decision of the European Opposition Division and filed reply appeal briefs in early November 2019. An opposition of European patent 3150610, a divisional patent of European patent 2534153, was filed on April 30, 2020. The divisional patent includes claims directed to use of rucaparib in a method of inhibiting PARP activity or treating cancer. The grounds of opposition for the divisional patent were lack of novelty, lack of inventive step, added subject matter, and insufficient disclosure – similar grounds on which the parent patent was opposed. It is common for an opponent to raise these grounds in an opposition. During examination, the European Patent Office considers all of these grounds and considered the application to comply with the applicable law when granting the patent. In particular, the

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novelty and inventive step challenges to the divisional patent are based on prior art references (or closely related disclosures) that were cited by the European patent examiner during prosecution of the application. As part of the proceeding, we have the opportunity to submit further arguments and pursue alternative claims in the form of auxiliary requests. While the ultimate results of patent challenges can be difficult to predict, we believe a number of factors support the patentability of this rucaparib use patent. We believe a successful challenge of all claims would be difficult. Clovis’ response is due on October 28, 2020. In Europe, regulatory exclusivity is available for ten years, plus one year for a new indication, therefore, we have regulatory exclusivity for Rubraca in Europe until 2028, and if an additional indication is approved, until 2029.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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 the U.S. Securities and Exchange Commission (“SEC”) as supplemented by the risk factors set forth herein, as updated from time to time in our subsequent SEC 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 of Clovis Oncology, Inc. in the 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 to Clovis Oncology, Inc., together with its consolidated subsidiaries.

Overview

We are a biopharmaceutical company focused on acquiring, developing and commercializing innovative anti-cancer agents in the 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

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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 in the 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 in December 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 and selected for therapy based on an FDA-approved companion diagnostic for Rubraca. In April 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.

In May 2018, the European Commission granted a conditional marketing authorization 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. In January 2019, the European 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 in the EU for certain patients in the recurrent ovarian cancer maintenance setting regardless of their BRCA mutation status. Following successful reimbursement negotiations, we have launched Rubraca in each of Germany, United Kingdom, Italy, France and Spain.

In May 2020, the FDA approved Rubraca tablets for the treatment of adult patients with a deleterious BRCA mutation (germline and/or somatic)-associated mCRPC who have been treated with androgen receptor-directed therapy and a taxane-based chemotherapy. The FDA approved this indication under accelerated approval based on objective response rate and duration of response data from the multi-center, single arm TRITON2 clinical trial. We have launched Rubraca for prostate cancer in the U.S. 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 the Rubraca accelerated approval in mCRPC.

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 (“BMS”) to evaluate its immunotherapy OPDIVO® (nivolumab) in combination with Rubraca. We initiated the Phase 2 LODESTAR study in December 2019 to evaluate Rubraca in homologous recombination repair genes across tumor types. The study is evaluating rucaparib as monotherapy treatment in patients with recurrent solid tumors associated with a deleterious mutation in homologous recombination repair genes. Based on our interactions with the FDA, we believe that this study may be registration-enabling for a targeted gene- and tumor-agnostic label, if data from the trial support the potential for an accelerated approval. Assuming enrollment in this study continues as planned, we may potentially file a supplemental New Drug Application with the FDA for this indication in 2021. We hold worldwide rights to Rubraca.

In addition to Rubraca, we have a second product candidate currently in clinical development. Lucitanib is an investigational, oral, potent inhibitor of the tyrosine kinase activity of vascular endothelial growth factor receptors 1 through 3 (“VEGFR1-3”), platelet-derived growth factor receptors alpha and beta (“PDGFR α/β”) and fibroblast growth factor receptors 1 through 3 (“FGFR1-3”). We believe that data for a drug similar to lucitanib that inhibits these same pathways – when combined with a PD-1 inhibitor – represent a scientific rationale for development of lucitanib in combination with a PD-1 inhibitor, and in February 2019, lucitanib was added to our clinical collaboration with BMS. Encouraging data of VEGF and PARP inhibitors in combination also supports the evaluation of lucitanib combined with Rubraca. Thus, we are currently enrolling Phase 1b/2 combination studies involving lucitanib consist of the Clovis-sponsored LIO-1 study of lucitanib in combination with nivolumab in advanced solid tumors and gynecologic cancers and an arm of the Clovis-sponsored SEASTAR study evaluating lucitanib in combination with Rubraca in advanced solid tumors and ovarian cancer. We hold the global (excluding China) development and commercialization rights for lucitanib.

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Following completion of preclinical work to support an IND application for the lead candidate under our license and collaboration agreement, designated internally as FAP-2286, we plan to conduct global clinical trials. We anticipate submitting two INDs for FAP-2286 for use as imaging and treatment agents, respectively, in Q4 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. We hold U.S. and global rights to FAP-2286, excluding Europe (defined to include Russia, Turkey and Israel), where 3BP retains rights. We also have agreed with 3BP to collaborate on a discovery program directed to up to three additional, undisclosed targets for peptide-targeted radionuclide therapy, to which we would obtain global rights for any resulting product candidates.

In September 2019, we entered into a license and collaboration agreement with 3BP to develop a peptide-targeted radionuclide therapy (“PTRT”) and imaging agent targeting fibroblast-activating protein alpha (“FAP”). FAP is highly expressed by cancer-associated fibroblasts found in a majority of tumor types, potentially making it a suitable target across a wide array of solid tumors. PTRT is an emerging class of drugs and it involves the injection of a small amount of radioactive material – a radionuclide – that is combined with a cancer-targeting peptide for use as a targeted radiopharmaceutical. The targeting peptide is able to recognize and bind to specific receptors on the cancer cell, such as antigens and cell receptors. When used in a targeted radiopharmaceutical, the peptide is designed to attach to cancer cells, and the intended result is to deliver a high dose of radiation to the tumor while sparing normal tissue because of its rapid systemic clearance. In order for the targeted radiopharmaceutical to be safe and efficacious, it must rapidly attach to cancer cells or in close vicinity to the cancer cells, be retained in or at the tumor site for a sufficient period of time that the radionuclide can have activity on the cancer cells, have minimal attachment to non-cancer cells and then be rapidly cleared from the body.

We commenced operations in April 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 ended June 30, 2020 and 2019, we have generated $82.5 million and $66.1 million, respectively, in product revenue related to sales of Rubraca.

We have never been profitable and, as of June 30, 2020, we had an accumulated deficit of $2,435.1 million. We incurred net losses of $191.6 million and $206.9 million for the six months ended June 30, 2020 and 2019, respectively. We had cash and cash equivalents totaling $261.4 million at June 30, 2020.

We have principally funded our operations using the net proceeds from the sale of convertible preferred stock, the issuance of convertible promissory notes, public offerings of our common stock, convertible senior notes offerings and our financing agreement related to our ATHENA trial. We expect to incur significant losses for the foreseeable future, as we incur costs related to commercial activities associated with Rubraca. Based on our current estimates, we believe that our cash, cash equivalents and available-for-sale securities will allow us to fund activities through at least the next 12 months. Until we can generate a sufficient amount of revenue from Rubraca, we expect to finance our operations in part through additional public or private equity or debt offerings and may seek additional capital through arrangements with strategic partners or from other sources. Adequate additional financing may not be available to us on acceptable terms, or at all. Our failure to raise capital as and when needed would have a negative impact on our financial condition and our ability to pursue our business strategy. We will need to generate significant revenues to achieve profitability, and we may never do so.

License Agreements

Rucaparib

In June 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.

On August 30, 2016, we entered into a first amendment to the worldwide license agreement with Pfizer, which amends the June 2011 existing worldwide license agreement to permit us to defer payment of the milestone payments payable upon (i) FDA approval of an NDA for 1st Indication in US and (ii) EMA approval of an MAA for 1st Indication in the EU, to a date that is 18 months after the date of achievement of such milestones.

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On December 19, 2016, Rubraca received its initial FDA approval. This approval resulted in a $0.75 million milestone payment to Pfizer as required by the license agreement, which was paid in the first quarter of 2017. This FDA approval also resulted in an obligation to pay a $20.0 million milestone payment, for which we exercised the option to defer payment by agreeing to pay $23.0 million within 18 months after the date of the FDA approval. We paid the $23.0 million milestone payment in June 2018.

In April 2018, Rubraca received a second FDA approval. This approval resulted in an obligation to pay a $15.0 million milestone payment, which we paid in April 2018.

In May 2018, Rubraca received its initial European Commission marketing authorization. This approval resulted in an obligation to pay a $20.0 million milestone payment, which we paid in June 2018.

In January 2019, Rubraca received a second European Commission approval. This approval resulted in an obligation to pay a $15.0 million milestone payment, which we paid in February 2019.

In June 2019, we paid a $0.75 million milestone payment due to the launch of Rubraca as maintenance therapy in Germany in March 2019.

In May 2020, Rubraca received a third FDA approval for Rubraca as a monotherapy treatment of adult patients with BRCA1/2-mutant recurrent, metastatic castrate-resistant prostate cancer. This approval resulted in an obligation to pay an $8.0 million milestone payment, which we paid in June 2020.

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.

In April 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.

Lucitanib

On November 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 of November 19, 2013 (the “Stock Purchase Agreement”), by and among the Company, EOS, its shareholders (the “Sellers”) and Sofinnova 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.

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In October 2008, Ethical Oncology Science, S.p.A. (“EOS”) (now known as Clovis Oncology Italy S.r.l.) entered into an exclusive license agreement with Advenchen Laboratories LLC (“Advenchen”) to develop and commercialize lucitanib on a global basis, excluding China.

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.

FAP Program

In September 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 signing of the license and collaboration agreement in September 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.

In February 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 effective December 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

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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.

Pursuant to terms of each of our product license agreements, we will pay royalties to our licensors on sales, if any, of the respective products.

Financial Operations Overview

Revenue

Product revenue is derived from sales of our product, Rubraca, in the United States and Europe. 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 ended June 30, 2020, we recorded product revenue of $39.9 million and $82.5 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 in the 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 ended June 30, 2020, the supply of this free drug was approximately 14% of the overall commercial supply or the equivalent of $12.7 million in commercial value.

Our ability to generate product revenues for the quarter ended June 30, 2020 was negatively affected, largely due to fewer new patient starts, as oncology practices and patients adjusted to the impact of the COVID-19 pandemic in the U.S. and Europe. As a result of the COVID-19 pandemic, our U.S. and European sales forces have had physical access to hospitals, clinics, doctors and pharmacies curtailed and/or have been limited. Our European launches in Italy, Spain and France occurred in an environment in which our field-based personnel in those countries have not been allowed to visit hospitals since as early as late February and into the second quarter; however, physical access in Europe has been gradually granted starting late second quarter. Similarly, we launched Rubraca for prostate cancer in the U.S beginning in May, but our physical access to hospital, clinics, doctors and pharmacies has been limited. An additional factor affecting our prostate cancer launch is that Foundation Medicine has not yet received FDA approval for the companion plasma-based diagnostic for Rubraca.

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.

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.

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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, disease education and other commercial product planning activities, including the hiring of a sales and marketing and medical affairs organization in preparation for commercial launch of Rubraca; 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 remained relatively flat in the three months ended June 30, 2020 compared to the same period in the prior year while they increased during the six months ended June 30, 2020 compared to the same period in the prior year. We expect research and development costs to be lower in the full year 2021 compared to full year 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 ended June 30, 2020 as we completed target enrollment of ATHENA, our largest clinical trial, during the second quarter. However, we may see disruption during the remainder of 2020 and into 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.

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,
	2020		2019		2020		2019
	(in thousands)
Rucaparib Expenses
Research and development	$	45,928	$	47,377	$	87,658	$	85,530
Rucaparib Total		45,928		47,377		87,658		85,530
FAP Expenses
Research and development	$	1,849	$	—	$	2,844	$	—
FAP Total		1,849		—		2,844		—
Lucitanib Expenses
Research and development		1,335		1,281		2,831		1,601
Lucitanib Total		1,335		1,281		2,831		1,601
Rociletinib Expenses
Research and development	$	(868)	$	175		(800)		525
Rociletinib Total		(868)		175		(800)		525
Personnel and other expenses		21,634		21,913		45,566		45,121
Total	$	69,878	$	70,746	$	138,099	$	132,777

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

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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 on December 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, our U.S. and European sales forces have had physical access to hospitals, clinics, doctors and pharmacies curtailed and/or have been limited, which may decrease sales and marketing expenses during the remainder of 2020 and possibly extending to 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 in the United States, and European and Asia-Pacific countries, in-person conferences and meetings requiring travel will decrease resulting in a decrease of our selling, general and administrative expenses.

Acquired In-Process Research and Development Expenses

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.

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 with U.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 December 31, 2019. Other than the adoption of the new credit losses standard discussed in Note 2, Summary of Significant Accounting Policies, there have not been any material changes to our critical accounting policies since December 31, 2019.

New Accounting Standards

From time to time, the Financial Accounting Standards Board (“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 June 30, 2020 and 2019:

The following table summarizes the results of our operations for the three months ended June 30, 2020 and 2019 (in thousands):

					Change
	Three months ended June 30,				Favorable/(Unfavorable)
	2020		2019		$		%
Revenues:
Product revenue	$	39,887	$	32,978	$	6,909		21	%
Operating expenses:
Cost of sales - product		9,120		6,445		(2,675)		(42)	%
Cost of sales - intangible asset amortization		1,280		1,217		(63)		(5)	%
Research and development		69,878		70,746		868		1	%
Selling, general and administrative		41,902		48,029		6,127		13	%
Other operating expenses		355		—		(355)		(100)	%
Total expenses		122,535		126,437		3,902		3	%
Operating loss		(82,648)		(93,459)		10,811		12	%
Other income (expense):
Interest expense		(6,739)		(3,817)		(2,922)		(77)	%
Foreign currency gain (loss)		142		(226)		368		163	%
Loss on extinguishment of debt		(3,277)		—		(3,277)		(100)	%
Legal settlement loss		—		(25,000)		25,000		100	%
Other income		239		1,899		(1,660)		(87)	%
Other income (expense), net		(9,635)		(27,144)		17,509		65	%
Loss before income taxes		(92,283)		(120,603)		28,320		23	%
Income tax benefit		36		176		(140)		(80)	%
Net loss	$	(92,247)	$	(120,427)	$	28,180		23	%

Product Revenue. Product revenue for the three months ended June 30, 2020 increased compared to the same period in the prior year primarily due to continued growth in sales of Rubraca, which is approved for sale in the United States and Europe markets. Following successful reimbursement negotiations, we launched Rubraca in Germany and United Kingdom in March 2019, Italy in November 2019, France in February 2020 and Spain in March 2020. In May 2020, the FDA approved Rubraca as a monotherapy treatment of adult patients with BRCA1/2-mutant recurrent, metastatic castrate-resistant prostate cancer and we have launched Rubraca for prostate cancer in the U.S. Product revenue is recorded net of variable considerations comprised of rebates, chargebacks and other discounts. Product revenue for the three months ended June 30, 2020 was $36.7 million in the United States and $3.2 million outside of the United States. Variable considerations represented 19.4% and 14.2% of the transaction price recognized in the three months ended June 30, 2020 and 2019, respectively. This increase is primarily due to the European National Health Service rebates related to our sales in Europe. In addition, beginning in January 2020, we began providing payor rebates, which is included in discounts and fees for the three months June 30, 2020. Amounts are summarized as follows:

	Three months ended				Three months ended
	June 30, 2020				June 30, 2019
	$		% of Gross Sales		$		% of Gross Sales
	(in thousands)				(in thousands)
Transaction price	$	49,497		100.0%	$	38,453		100.0%
Variable considerations:
Government rebates and chargebacks		6,636		13.4%		3,514		9.1%
Discounts and fees		2,974		6.0%		1,961		5.1%
Total variable considerations		9,610		19.4%		5,475		14.2%
Product revenue	$	39,887		80.6%	$	32,978		85.8%

Cost of Sales – Product. Product cost of sales for the three months ended June 30, 2020 increased compared to the same period in the prior year primarily due to the increase in product revenue. Product cost of sales primarily relate to manufacturing, freight and royalties costs associated with Rubraca sales in the period. The increase in product revenue resulted in $1.6 million in royalties.

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Cost of Sales – Intangible Asset Amortization. In the three months ended June 30, 2020 and 2019, we recognized cost of sales of $1.3 million and $1.2 million, respectively, associated with the amortization of capitalized milestone payments related to the approvals of Rubraca by the FDA and the European Commission.

Research and Development Expenses. Research and development expenses remained relatively flat in the three months ended June 30, 2020 compared to the same period in the prior year.

Selling, General and Administrative Expenses. Selling, general and administrative expenses decreased during the three months ended June 30, 2020 compared to the same period in the prior year primarily due to decreased commercialization activities for Rubraca and the decrease in costs associated with European commercialization. This includes a decrease of $2.9 million in marketing costs. In addition, there was a decrease of $1.6 million in travel due to the COVID-19 pandemic.

Interest Expense. Interest expense increased during the three months ended June 30, 2020 compared to the same period in the prior year primarily due to the May 2019 financing agreement related to our ATHENA trial. In addition, our convertible senior notes transactions during the quarter resulted in the write off of $0.8 million of unamortized debt issuance costs, which was recorded as interest expense.

Loss on Extinguishment of Debt. In April 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.

Legal Settlement Loss.  During the second quarter of 2019, we recorded a one-time charge of $25.0 million to settle a complaint filed by Antipodean Domestic Partners.

Other Income. Other income decreased during the three months ended June 30, 2020 compared to the same period in the prior year due to interest income earned on our available-for-sale securities.

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Comparison of Six Months Ended June 30, 2020 and 2019:

The following table summarizes the results of our operations for the six months ended June 30, 2020 and 2019 (in thousands):

					Change
	Six months ended June 30,				Favorable/(Unfavorable)
	2020		2019		$		%
Revenues:
Product revenue	$	82,451	$	66,096	$	16,355		25	%
Operating expenses:
Cost of sales - product		18,216		13,851		(4,365)		(32)	%
Cost of sales - intangible asset amortization		2,492		2,337		(155)		(7)	%
Research and development		138,099		132,777		(5,322)		(4)	%
Selling, general and administrative		84,500		95,791		11,291		12	%
Other operating expenses		3,805		—		(3,805)		(100)	%
Total expenses		247,112		244,756		(2,356)		(1)	%
Operating loss		(164,661)		(178,660)		13,999		8	%
Other income (expense):
Interest expense		(16,300)		(7,407)		(8,893)		(120)	%
Foreign currency loss		(735)		(419)		(316)		(75)	%
Loss on convertible senior notes conversion		(7,791)		—		(7,791)		(100)	%
Loss on extinguishment of debt		(3,277)		—		(3,277)		(100)	%
Legal settlement loss		—		(25,000)		25,000		100	%
Other income		1,081		4,300		(3,219)		(75)	%
Other income (expense), net		(27,022)		(28,526)		1,504		5	%
Loss before income taxes		(191,683)		(207,186)		15,503		7	%
Income tax benefit		104		336		(232)		69	%
Net loss	$	(191,579)	$	(206,850)	$	15,271		7	%

Product Revenue. Product revenue for the six months ended June 30, 2020 increased compared to the same period in the prior year primarily due to continued growth in sales of Rubraca, which is approved for sale in the United States and Europe markets. Following successful reimbursement negotiations, we launched Rubraca in Germany and United Kingdom in March 2019, Italy in November 2019, France in February 2020 and Spain in March 2020. In May 2020, the FDA approved Rubraca as a monotherapy treatment of adult patients with BRCA1/2-mutant recurrent, metastatic castrate-resistant prostate cancer and we have launched Rubraca for prostate cancer in the U.S. Product revenue is recorded net of variable considerations comprised of rebates, chargebacks and other discounts. Product revenue for the six months ended June 30, 2020 was $76.0 million in the United States and $6.5 million outside of the United States. Variable considerations represented 21.1% and 14.1% of the transaction price recognized in the six months ended June 30, 2020 and 2019, respectively. This increase is primarily due to coverage gap rebates, PHS chargebacks and the European National Health Service rebates related to our sales in Europe. In addition, beginning in January 2020, we began providing payor rebates, which is included in discounts and fees for the six months June 30, 2020. Amounts are summarized as follows:

	Six months ended				Six months ended
	June 30, 2020				June 30, 2019
	$		% of Gross Sales		$		% of Gross Sales
	(in thousands)				(in thousands)
Transaction price	$	104,460		100.0%	$	76,983		100.0%
Sales deductions:
Government rebates and chargebacks		15,219		14.6%		6,902		9.0%
Discounts and fees		6,790		6.5%		3,985		5.2%
Total sales deductions		22,009		21.1%		10,887		14.1%
Product revenue	$	82,451		78.9%	$	66,096		85.9%

Cost of Sales – Product. Product cost of sales for the six months ended June 30, 2020 increased compared to the same period in the prior year primarily due to the increase in product revenue. Product cost of sales primarily relate to manufacturing, freight and royalties costs associated with Rubraca sales in the period.

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Cost of Sales – Intangible Asset Amortization. In the six months ended June 30, 2020 and 2019, we recognized cost of sales of $2.5 million and $2.3 million, respectively, associated with the amortization of capitalized milestone payments related to the approvals of Rubraca by the FDA and the European Commission.

Research and Development Expenses. Research and development expenses increased during the six months ended June 30, 2020 compared to the same period in the prior year primarily due to higher research and development costs for Rubraca. We have increased costs related to our ATHENA combination study with Bristol-Myers Squibb Company’s immunotherapy nivolumab for ovarian cancer.

Clinical trial costs for lucitanib were $1.2 million higher than the six months ended June 30, 2019 primarily due to increased enrollment in our Phase 1b/2 studies. In addition, we incurred $2.8 million for FAP-2286 as we have begun to pursue a clinical development program in multiple tumor types.

Selling, General and Administrative Expenses. Selling, general and administrative expenses decreased during the six months ended June 30, 2020 compared to the same period in the prior year primarily due to decreased commercialization activities for Rubraca and the decrease in costs associated with European commercialization. This includes a decrease of $7.7 million in marketing costs. In addition, there was a decrease of $1.8 million in legal costs.

Other Operating Expenses. During the six months ended June 30, 2020, we recognized other operating expenses related to our dedicated production train at Lonza.

Interest Expense. Interest expense increased during the six months ended June 30, 2020 compared to the same period in the prior year primarily due to the May 2019 financing agreement related to our ATHENA trial. In addition, our convertible senior notes transactions during the year resulted in the write off of $4.3 million of unamortized debt issuance costs, which was recorded as interest expense.

Loss on Convertible Senior Notes Conversion. In January 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. We used the proceeds of the share offering to repurchase 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 ended June 30, 2020.

Loss on Extinguishment of Debt. In April 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.

Legal Settlement Loss.  During the second quarter of 2019, we recorded a one-time charge of $25.0 million to settle a complaint filed by Antipodean Domestic Partners.

Other Income. Other income decreased during the six months ended June 30, 2020 compared to the same period in the prior year due to interest income earned on our available-for-sale securities.

Liquidity and Capital Resources

To date, we have principally funded our operations using the net proceeds from the sale of convertible preferred stock, the issuance of convertible promissory notes, public offerings of our common stock, convertible senior notes offering and our financing agreement related to our ATHENA trial. At June 30, 2020, we had cash and cash equivalents totaling $261.4 million.

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The following table sets forth the primary sources and uses of cash for the six months ended June 30, 2020 and 2019 (in thousands):

	Six months ended June 30,
	2020		2019
Net cash used in operating activities	$	(142,351)	$	(196,488)
Net cash provided by investing activities		126,607		73,832
Net cash provided by financing activities		115,651		9,344
Effect of exchange rate changes on cash and cash equivalents		(304)		43
Net increase (decrease) in cash and cash equivalents	$	99,603	$	(113,269)

Operating Activities

Net cash used in operating activities resulted primarily from our net losses adjusted for non-cash items and changes in components of working capital. Net cash used in operating activities was lower during the six months ended June 30, 2020 compared to the same period in the prior year primarily due to a lower net loss, decreased by the non-cash write-off of debt issuance costs related to the convertible senior notes transactions, loss related to the convertible senior notes conversion and loss on extinguishment of debt. In addition, there was a reduction in payments made for inventory during the quarter.

Investing Activities

Net cash provided by investing activities for the six months ended June 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. Net cash used in investing activities in the same period in the prior year included sales of available-for-sale securities of $296.8 million, offset by purchases of available-for-sale securities of $205.8 million and a milestone payment of $15.8 million.

Financing Activities

Net cash provided by financing activities for the six months ended June 30, 2020 included proceeds of $246.7 million from the issuance of common stock, partially offset by the payment of our 2024 Notes. In addition, we had $33.3 million proceeds from borrowings under our financing agreement.

Operating Capital Requirements

In the 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. In the EU, Rubraca is approved by the EMA for two indications for patients with recurrent epithelial 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 June 30, 2020, we had cash and cash equivalents totaling $261.4 million and total current liabilities of $112.6 million.

Because of the numerous risks and uncertainties associated with research, development and commercialization of pharmaceutical products, we are unable to estimate the exact amounts of our working capital requirements. Our future funding requirements will depend on many factors, including but not limited to:

● 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;

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● 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.

In April 2020, we entered into a privately negotiated exchange agreement with a holder (“Holder”) of our 2021 Notes, pursuant to which we issued to such Holder of the 2021 Notes approximately $36.1 million in aggregate principal amount (the “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 (the “Exchange Transaction”). We did not receive any cash proceeds from the Exchange Transaction. In April and May 2020, approximately $24.3 million in principal amount of 2024 Notes were converted into 3,331,870 shares of our common stock at the conversion rate of 137.2213 shares per $1,000 in principal amount of 2024 Notes. In May 2020, we sold 11,090,000 shares of our common stock in a public offering at $8.05 per share. The net proceeds from the offering were $82.8 million, after deducting underwriting discounts and commissions and offering expenses. Based on current estimates, we believe that our existing cash, cash equivalents and available-for-sale securities will allow us to fund our operating plan through at least the next 12 months.

Impact of COVID-19 Pandemic

Our ability to generate product revenues for the quarter ended June 30, 2020 was negatively affected, largely due to fewer new patient starts, as oncology practices and patients adjusted to the impact of the COVID-19 pandemic in the U.S. and Europe. As a result of the COVID-19 pandemic, our U.S. and European sales forces have had physical access to hospitals, clinics, doctors and pharmacies curtailed and/or have been limited. Our European launches in Italy, Spain and France occurred in an environment in which our field-based personnel in those countries have not been allowed to visit hospitals since as early as late February and into the second quarter; however, physical access in Europe has been gradually granted starting late second quarter. Similarly, we launched Rubraca for prostate cancer in the U.S. beginning in May, but our physical access to hospitals, clinics, doctors and pharmacies has been limited. We saw no clear trend in U.S. new patient starts through May 2020, but saw a meaningful decline in June 2020. In July 2020, we saw a recovery back toward the previous levels, aided by U.S. new patient starts in the newly-approved prostate indication. In July 2020, we also saw improved sales performance in the EU. However, it is too early to discern or predict any trend in new patient starts or EU revenues due to the unpredictability of the COVID-19 situation.

This curtailment of and/or limited physical access may also decrease sales and marketing expenses during the remainder of 2020 and possibly extending to 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 in the United States, and European and Asia-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.

We did not see material disruption to our clinical trials as a result of the COVID-19 pandemic for the three and six months ended June 30, 2020 as we completed target enrollment of ATHENA, our largest clinical trial, during the second quarter. However, we may see disruption during the remainder of 2020 and into 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.

On March 18, 2020, the Families First Coronavirus Response Act (“FFCR Act”), and on March 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 after December 31, 2017. We evaluated the impact of this legislation and the income tax provisions did not result in a material cash benefit to us. Future regulatory guidance under the FFCR Act and the CARES Act (as well as under the Tax Cuts and Jobs Act) remains forthcoming, and such guidance could ultimately increase or lessen their impact on our business and financial condition. It is also highly possible that Congress will enact additional legislation in connection with the COVID-19 pandemic, some of which could impact us.

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.

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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 2019 Annual Report on Form 10-K. For further information regarding our contractual obligations and commitments, see Note 15, Commitments and Contingencies to our unaudited consolidated financial statements included elsewhere in this report.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are exposed to market risk related to changes in interest rates. As of June 30, 2020, we had cash and cash equivalents of $261.4 million, consisting of bank demand deposits, money market funds and U.S. treasury securities. The primary objectives of our investment policy are to preserve principal and maintain proper liquidity to meet operating needs. Our investment policy specifies credit quality standards for our investments and limits the amount of credit exposure to any single issue, issuer or type of investment. Our primary exposure to market risk is interest rate sensitivity, which is affected by changes in the general level of U.S. interest rates, particularly because our investments are in short-term securities. Our available-for-sale securities are subject to interest rate risk and will decline in value if market interest rates increase. Due to the short-term duration of our investment portfolio and the low risk profile of our investments, an immediate 100 basis point change in interest rates would not have a material effect on the fair value of our portfolio.

We contract with contract research organizations, investigative sites and contract manufacturers globally where payments are made in currencies other than the U.S. dollar. In addition, on October 3, 2016, we entered into a Manufacturing and Services Agreement with a Lonza, a Swiss company, for the long-term manufacture and supply of the API for Rubraca. Under the terms of this agreement, payments for the supply of the active ingredient in Rubraca as well as scheduled capital program fee payment toward capital equipment and other costs associated with the construction of a dedicated production train will be made in Swiss Francs. Once the production train became operational in October 2018, we became obligated to pay a fixed facility fee each quarter for the duration of the agreement, which expires on December 31, 2025.

As of June 30, 2020, $74.5 million of purchase commitments exist under the Manufacturing and Services Agreement, which includes the fixed facility fee noted above, and we are required to remit amounts due in Swiss francs. Due to other variables that may exist, it is difficult to quantify the impact of a particular change in exchange rates. However, we estimate that if the value of the US dollar was to strengthen by 10% compared to the value of Swiss franc as of June 30, 2020, it would decrease the total US dollar purchase commitment under the Manufacturing and Services Agreement by $13.1 million. Similarly, a 10% weakening of the US dollar compared to the Swiss franc would increase the total US dollar purchase commitment by $0.5 million.

While we periodically hold foreign currencies, primarily Euro, Swiss Franc and Pound Sterling, we do not use other financial instruments to hedge our foreign exchange risk. Transactions denominated in currencies other than the functional currency are recorded based on exchange rates at the time such transactions arise. As of June 30, 2020 and December 31, 2019, approximately 2% and 4%, respectively, of our total liabilities were denominated in currencies other than the functional currency.

ITEM 4. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

Our disclosure controls and procedures are designed to ensure that information required to be disclosed in the reports we file or submit under the Securities Exchange Act of 1934, as amended (“Exchange Act”) is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to our management, including the Chief Executive Officer and the Chief Finance Officer, to allow timely decisions regarding required disclosures. Any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objective. With the participation of our Chief Executive Officer and Chief Finance Officer, management performed an evaluation as of June 30, 2020 of the effectiveness of the design and operation of our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act. Based on this evaluation, our Chief Executive Officer and Chief Finance Officer concluded that, as of June 30, 2020, our disclosure controls and procedures were effective at the reasonable assurance level.

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Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting during the quarter ended June 30, 2020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION

ITEM 1.LEGAL PROCEEDINGS

Rociletinib-Related Litigation

Following Clovis’ regulatory announcement in November 2015 of adverse developments in its ongoing clinical trials for rociletinib, Clovis and certain of its current and former executives were named in various securities lawsuits, the largest of which was a putative class action lawsuit in the District of Colorado (the “Medina Action”) which was settled on October 26, 2017 (the “Medina Settlement”). The remaining actions are discussed below.

In March 2017, two putative shareholders of the Company, Macalinao and McKenry (the “Derivative Plaintiffs”), filed shareholder derivative complaints against certain directors and officers of the Company in the Court of Chancery of the State of Delaware. On May 4, 2017, the Macalinao and McKenry actions were consolidated for all purposes in a single proceeding under the caption In re Clovis Oncology, Inc. Derivative Litigation, Case No, 2017-0222 (the “Consolidated Derivative Action”).  

On May 18, 2017, the Derivative Plaintiffs filed a Consolidated Verified Shareholder Derivative Complaint (the “Consolidated Derivative Complaint”). The Consolidated Derivative Complaint generally alleged that the defendants breached their fiduciary duties owed to the Company by allegedly causing or allowing misrepresentations of the Company’s business operations and prospects, failing to ensure that the TIGER-X clinical trial was being conducted in accordance with applicable rules, regulations and protocols, and engaging in insider trading. The Consolidated Derivative Complaint sought, among other things, an award of money damages.  

On July 31, 2017, the defendants filed a motion to dismiss the Consolidated Derivative Complaint. Plaintiffs filed an opposition to the motion to dismiss on August 31, 2017, and the defendants filed a reply in further support of the motion to dismiss on September 26, 2017.

While the motion to dismiss remained pending, on November 19, 2018, Plaintiffs filed a motion for leave to file a supplemental consolidated complaint, and on November 20, 2018, the Court granted that motion. On November 27, 2018, Plaintiffs filed their supplemental complaint (the “Supplemental Derivative Complaint”), which adds allegations concerning the Company’s, Mr. Mahaffy’s and Mr. Mast’s settlements with the United States Securities and Exchange Commission. Pursuant to a briefing schedule entered by the Court, the defendants filed a supplemental motion to dismiss the Supplemental Derivative Complaint on February 6, 2019; plaintiffs filed an opposition brief on February 22, 2019; and the defendants filed a reply brief on March 5, 2019. The Court held oral arguments on the defendants’ motions to dismiss on June 19, 2019. At the oral arguments, the Court ordered the parties to submit supplemental letter briefs on the motion to dismiss.

On October 1, 2019, Vice Chancellor Joseph R. Slights III of the Delaware Chancery Court, issued a Memorandum Opinion granting in part and denying in part defendants’ motions to dismiss. The Supplemental Derivative Complaint was dismissed as to Plaintiffs’ derivative claims for unjust enrichment and insider trading. The Court allowed Plaintiffs’ remaining derivative claim for breach of fiduciary duty to proceed. Defendants filed an answer to the Supplemental Derivative Complaint on December 27, 2019.

On December 17, 2019, the parties participated in a mediation, which did not result in a settlement. On December 22, 2019, the Company’s board of directors formed a Special Litigation Committee (the “SLC”) to conduct an investigation of the claims asserted in the Supplemental Derivative Complaint. On February 18, 2020, the SLC moved to stay all proceedings in the Consolidated Derivative Action pending completion of its investigation. Plaintiffs filed their opposition to the motion to stay on March 3, 2020 and the SLC filed its reply on March 13, 2020. On May 12, 2020, after hearing oral argument, Vice Chancellor Slights granted the SLC’s motion to stay proceedings until September 18, 2020 so that the SLC may complete its investigation.

While the SLC’s investigation remains ongoing, the Company does not believe this litigation will have a material impact on its financial position or results of operations.

On March 20, 2017, a purported shareholder of the Company, filed a shareholder derivative complaint (the “Guo Complaint”) against certain officers and directors of the Company in the United States District Court for the District of

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Colorado. The Guo Complaint generally alleged that the defendants breached their fiduciary duties owed to the Company by either recklessly or with gross negligence approving or permitting misrepresentations of the Company’s business operations and prospects. The Guo Complaint also alleged claims for waste of corporate assets and unjust enrichment. Finally, the Guo Complaint alleged that certain of the individual defendants violated Section 14(a) of the Securities Exchange Act, by allegedly negligently issuing, causing to be issued, and participating in the issuance of materially misleading statements to stockholders in the Company’s Proxy Statement on Schedule DEF 14A in connection with the 2015 Annual Meeting of Stockholders, held on June 11, 2015. The Guo Complaint sought, among other things, an award of money damages.  

On June 19, 2017, the parties filed a joint motion to stay the Guo action pending resolution of the motion to dismiss the Consolidated Derivative Complaint. On June 20, 2017, the court granted the motion to stay. Based on the October 1, 2019 ruling in the Consolidated Derivative Action, on October 22, 2019, the court lifted the stay. The parties participated in a scheduling conference on December 9, 2019, following which the court set the dates for pre-trial conference and trial for March 2, 2021 and March 29, 2021, respectively. On December 23, 2019, the plaintiff filed an amended complaint, and on February 7, 2020, the plaintiff filed a second amended complaint. On February 28, 2020, the defendants moved to dismiss the second amended Guo complaint. The plaintiff filed an opposition to the motion to dismiss on March 20, 2020 and the defendants filed their reply on April 3, 2020.

The Company intends to vigorously defend against the allegations in the second amended Guo complaint, but there can be no assurance that the defense will be successful.

European Patent Opposition

Oppositions were filed in the granted European counterparts of two patents in the rucaparib camsylate salt/polymorph patent family. An opposition of European patent 2534153 was filed by two opponents on June 20, 2017. The European Patent Office’s Opposition Division held an oral hearing on December 4, 2018, during which it upheld claims, narrowed from the originally granted patent, to certain crystalline forms of rucaparib camsylate, including, but not limited to, rucaparib S-camsylate Form A, the crystalline form in Rubraca. Clovis and one opponent, Hexal, appealed the written decision of the European Opposition Division and filed reply appeal briefs in early November 2019. An opposition of European patent 3150610, a divisional patent of European patent 2534153, was filed on April 30, 2020. The divisional patent includes claims directed to use of rucaparib in a method of inhibiting PARP activity or treating cancer. The grounds of opposition for the divisional patent were lack of novelty, lack of inventive step, added subject matter, and insufficient disclosure – similar grounds on which the parent patent was opposed. It is common for an opponent to raise these grounds in an opposition. During examination, the European Patent Office considers all of these grounds and considered the application to comply with the applicable law when granting the patent. In particular, the novelty and inventive step challenges to the divisional patent are based on prior art references (or closely related disclosures) that were cited by the European patent examiner during prosecution of the application. As part of the proceeding, we have the opportunity to submit further arguments and pursue alternative claims in the form of auxiliary requests. While the ultimate results of patent challenges can be difficult to predict, we believe a number of factors support the patentability of this rucaparib use patent. We believe a successful challenge of all claims would be difficult. Clovis’ response is due on October 28, 2020. In Europe, regulatory exclusivity is available for ten years, plus one year for a new indication, therefore, we have regulatory exclusivity for Rubraca in Europe until 2028, and if an additional indication is approved, until 2029.

ITEM 1A. RISK FACTORS

Our business faces significant risks and uncertainties. Certain factors may have a material adverse effect on our business prospects, financial condition and results of operations, and you should carefully consider them. Accordingly, in evaluating our business, we encourage you to consider the risk factors described under the heading “Risk Factors” in Part I, Item 1A of our most recent Annual Report on Form 10-K, in addition to other information contained in or incorporated by reference into this Quarterly Report on Form 10-Q and our other public filings with the SEC. Other events that we do not currently anticipate or that we currently deem immaterial may also affect our business, prospects, financial condition and results of operations.

There were no material changes to the risk factors included in our previously filed Annual Report on Form 10-K for the year ended December 31, 2019, other than as highlighted below in connection with the COVID-19 pandemic.

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Additional risks and uncertainties not presently known to us or that we currently believe are immaterial also may negatively impact our business.

The outbreak of COVID-19 could materially adversely affect our business.

On January 30, 2020, the World Health Organization (the “WHO”) declared that the recent novel coronavirus disease (COVID-19) outbreak was a public health emergency of international concern, and on March 11, 2020 the WHO declared the COVID-19 outbreak a pandemic. This has resulted in increased travel restrictions, quarantines, “work-at-home” and “shelter-in-place” orders and extended shutdown of certain non-essential businesses in the United States, and European and Asia-Pacific countries, including countries in which we commercialize Rubraca and countries in which we have planned or active clinical trials. With a renewed rise in the number of cases of the coronavirus in certain parts of the United States and Europe and the ongoing uncertainty regarding future trends in cases, these restrictions, quarantines, shutdowns and other disruption to businesses globally continue to evolve and, in many areas, increase. The effects of the coronavirus are difficult to assess or predict.

Our ability to generate product revenues for the quarter ended June 30, 2020 was negatively affected, largely due to fewer new patient starts, as oncology practices and patients adjusted to the impact of the coronavirus (COVID-19) pandemic in the U.S. and Europe. We anticipate that the outbreak will likely have a significant impact on our business in future quarters, and cannot currently predict the extent or duration of that impact.

The outbreak of COVID-19 has had a major impact on the financial markets, the global economy or the economies of particular countries or regions. Specifically, the COVID-19 outbreak could result in reduced operations of third-party manufacturers upon whom we rely, disrupt our supply chain, or otherwise limit our ability to obtain sufficient materials to manufacture Rubraca and our product candidates. While we believe that we have sufficient supply of Rubraca and our product candidates to continue our commercial and clinical operations as planned, Rubraca and our product candidates, or materials contained therein, come from facilities located in areas impacted by COVID-19 or that may be impacted, as the COVID-19 outbreak or its disruption worsens. If any third party in our supply or distribution chain for materials or finished product are adversely impacted by restrictions resulting from the COVID-19 outbreak, including staffing shortages, production slowdowns and disruptions in delivery systems, our supply chain may be disrupted, limiting our ability to manufacture and distribute Rubraca for commercial sales and our product candidates for our clinical trials and research and development operations. There is no guarantee that the recent COVID-19, or any potential future, outbreak would not impact our future supply chain, which could have a material adverse impact on our clinical trial plans and business operations. 

Our sales force has had physical access to hospitals, clinics, doctors and pharmacies curtailed and/or has been limited, which may have a material adverse effect on our future sales. While digital tools are available to our field employees to facilitate remote meetings with healthcare providers, we cannot ensure that these methods will be effective. Additionally, patients who might be currently using Rubraca, or might otherwise be eligible to use our products, may be unable to meet with their healthcare providers in person, which may reduce the number of prescription refills or new patient starts, affecting our revenues from Rubraca both in our currently approved ovarian cancer indications, as well as impacting our current launch in BRCA-mutant metastatic castration-resistant prostate cancer, which was approved during the second quarter of 2020.

Furthermore, our clinical trials may be affected by the COVID-19 outbreak. Although we did not see material disruption to our clinical trials as a result of the COVID-19 pandemic for the six months ended June 30, 2020, we could see material disruption during the remainder of 2020 and into 2021. During the second quarter of 2020, we observed a slight decrease in the rate of enrollment in ATHENA, our largest clinical trial, culminating in the completion of target enrollment in ATHENA in that quarter. As the outbreak persists in countries in which we conduct or plan to conduct our clinical trials, activities such as site initiation, patient enrollment, trial data collection, and site monitoring visits may be delayed or stalled due to travel and access restrictions, diversion of healthcare resources toward the COVID-19 outbreak, which we have already started to see in certain of our trial sites, patient or staff unwillingness to visit hospitals and clinics and participate in our trials, or quarantines and other restrictions that may impede patient or staff movement and study drug availability at trial sites, interrupt healthcare services or otherwise prevent patient compliance with clinical trial protocols. Additionally, we may slow or delay enrollment in certain trials to manage expenses.

In addition, COVID-19 could affect our employees, our agents and their employees or the employees of companies with which we do business, thereby disrupting our business operations. We have implemented work-at-home

46

policies and may experience limitations in employee resources. Our increased reliance on personnel working from home may negatively impact productivity, or disrupt, delay, or otherwise adversely impact our business. The effects of working from home and other burdens imposed by COVID-19 on individuals may impact our employee retention. In addition, our reliance on personnel working from home could increase our cyber security risk, create data accessibility concerns, and make us more susceptible to communication disruptions, any of which could adversely impact our business operations or delay necessary interactions with local and federal regulators, manufacturing sites, research or clinical trial sites and other important agencies and contractors.

On March 18, 2020, the Families First Coronavirus Response Act (“FFCR Act”), and on March 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 after December 31, 2017. We evaluated the impact of this legislation and the income tax provisions did not result in a material cash benefit to us. Future regulatory guidance under the FFCR Act and the CARES Act (as well as under the Tax Cuts and Jobs Act) remains forthcoming, and such guidance could ultimately increase or lessen their impact on our business and financial condition. It is also highly possible that Congress will enact additional legislation in connection with the COVID-19 pandemic, some of which could impact us.

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, we may face difficulties raising capital or which may be on unfavorable terms. In addition, a recession, depression or other sustained adverse market event resulting from the spread of the coronavirus could materially and adversely affect our business and the value of our common stock. A number of governments in places where we have operations have adopted stimulus programs to assist businesses effected by COVID-19, including by facilitating lending arrangements. We may access these loan programs for additional working capital although there can be no guarantee that we will obtain any such loans and we do not currently know the terms of such loan programs.

The effectiveness of external parties, including governmental and non-governmental organizations, in combating the spread and severity of COVID-19 could have a material impact on the losses we experience. These events could cause a material adverse effect on our results of operations in any period and, depending on their severity, could also materially and adversely affect our financial condition.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not Applicable.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS

INDEX TO EXHIBITS

o
Exhibit
Number	Exhibit Description
3.1(5)	Amended and Restated Certificate of Incorporation of Clovis Oncology, Inc.

47

3.2(19)	Certificate of Amendment to Amended and Restated Certificate of Incorporation of Clovis Oncology, Inc.
3.3(5)	Amended and Restated Bylaws of Clovis Oncology, Inc.
3.4(22)	Amendment No. 1 to the Amended and Restated Bylaws of Clovis Oncology, Inc.
4.1(3)	Form of Common Stock Certificate of Clovis Oncology, Inc.
4.2(7)	Indenture dated as of September 9, 2014, by and between the Company and The Bank of New York Mellon Trust Company, N.A.
4.3(14)	Indenture dated as of April 19, 2018, by and between Clovis Oncology, Inc. and The Bank of New York Mellon Trust Company, N.A., as Trustee
4.4(14)	First Supplemental Indenture dated as of April 19, 2018, by and between Clovis Oncology, Inc. and The Bank of New York Mellon Trust Company, N.A.
4.5(20)	Indenture dated as of August 13, 2019, by and between Clovis Oncology, Inc. and The Bank of New York Mellon Trust Company, N.A., as Trustee
4.6 (21)	Description of the Registrant’s Securities Registered Pursuant to Section 12 of the Securities Exchange Act of 1934
10.1*(4)	License Agreement, dated as of June 2, 2011, by and between Clovis Oncology, Inc. and Pfizer Inc.
10.2+(1)	Clovis Oncology, Inc. 2009 Equity Incentive Plan.
10.3+(4)	Clovis Oncology, Inc. 2011 Stock Incentive Plan.
10.4+	Clovis Oncology, Inc. 2020 Stock Incentive Plan
10.5+(1)	Form of Clovis Oncology, Inc. 2009 Equity Incentive Plan Stock Option Agreement.
10.6+(4)	Form of Clovis Oncology, Inc. 2011 Stock Incentive Plan Stock Option Agreement.
10.7+(23)	Form of Clovis Oncology, Inc. 2020 Stock Incentive Plan Option Agreement.
10.8+(23)	Form of Clovis Oncology, Inc. 2020 Stock Incentive Plan Restricted Stock Unit Agreement.
10.9+(3)	Employment Agreement, dated as of August 24, 2011, by and between Clovis Oncology, Inc. and Patrick J. Mahaffy.
10.10+(3)	Employment Agreement, dated as of August 24, 2011, by and between Clovis Oncology, Inc. and Gillian C. Ivers-Read.
10.11+(1)	Indemnification Agreement, dated as of May 15, 2009, between Clovis Oncology, Inc. and Paul Klingenstein.
10.12+(1)	Indemnification Agreement, dated as of May 15, 2009, between Clovis Oncology, Inc. and James C. Blair.

48

10.13+(1)	Indemnification Agreement, dated as of May 15, 2009, between Clovis Oncology, Inc. and Edward J. McKinley.
10.14+(1)	Indemnification Agreement, dated as of May 15, 2009, between Clovis Oncology, Inc. and Thorlef Spickschen.
10.15+(1)	Indemnification Agreement, dated as of May 15, 2009, between Clovis Oncology, Inc. and M. James Barrett.
10.16+(1)	Indemnification Agreement, dated as of May 15, 2009, between Clovis Oncology, Inc. and Brian G. Atwood.
10.17+(1)	Indemnification Agreement, dated as of May 12, 2009, between Clovis Oncology, Inc. and Patrick J. Mahaffy.
10.18+(1)	Indemnification Agreement, dated as of May 12, 2009, between Clovis Oncology, Inc. and Erle T. Mast.
10.19+(1)	Indemnification Agreement, dated as of May 12, 2009, between Clovis Oncology, Inc. and Gillian C. Ivers-Read.
10.20+(15)	Clovis Oncology, Inc. 2011 Employee Stock Purchase Plan, as amended.
10.21+(4)	Clovis Oncology, Inc. 2011 Cash Bonus Plan.
10.22+(2)	Indemnification Agreement, dated as of June 13, 2013, between Clovis Oncology, Inc. and Ginger L. Graham.
10.23+(2)	Indemnification Agreement, dated as of June 13, 2013, between Clovis Oncology, Inc. and Keith Flaherty.
10.24(6)	Stock Purchase Agreement, dated as of November 19, 2013, by and among the Company, EOS, the Sellers listed on Exhibit A thereto and Sofinnova Capital V FCPR, acting in its capacity as the Sellers’ Representative.
10.25*(6)	Development and Commercialization Agreement, dated as of October 24, 2008, by and between Advenchen Laboratories LLC and Ethical Oncology Science S.P.A., as amended by the First Amendment, dated as of April 13, 2010 and the Second Amendment, dated as of July 30, 2012.
10.26+(10)	Indemnification Agreement, effective as of August 3, 2015, between Clovis Oncology, Inc. and Lindsey Rolfe.
10.27+(17)	Amended and Restated Employment Agreement, dated as of February 27, 2019, by and between Clovis Oncology, Inc. and Clovis Oncology UK Limited and Dr. Lindsey Rolfe.
10.28+(8)	Indemnification Agreement, dated as of February 17, 2016, between Clovis Oncology, Inc. and Daniel W. Muehl.
10.29+(13)	Employment Agreement, dated as of July 6, 2017, by and between Clovis Oncology, Inc. and Daniel W. Muehl.

49

10.30*(9)	First Amendment to License Agreement, between Clovis Oncology, Inc. and Pfizer Inc., dated as of August 30, 2016.
10.31+(11)	Form of Clovis Oncology, Inc. 2011 Stock Incentive Plan RSU Agreement.
10.32*(11)	Manufacturing Services Agreement, by and between Clovis Oncology, Inc. and Lonza Ltd, dated as of October 3, 2016.
10.33*(12)	Strata Trial Collaboration Agreement, by and between Clovis Oncology, Inc. and Strata Oncology, Inc., dated as of January 30, 2017
10.34+(16)	Indemnification Agreement, dated as of October 11, 2018, between Clovis Oncology, Inc. and Robert W. Azelby.
10.35+(16)	Indemnification Agreement, dated as of October 11, 2018, between Clovis Oncology, Inc. and Richard A. Fair.
10.36+(17)	Employment Agreement, dated as of July 6, 2017, by and between Clovis Oncology, Inc. and Paul Gross.
10.37+(17)	Indemnification Agreement, dated as of September 9, 2016, by and between Clovis Oncology, Inc. and Paul Gross.
10.38(18)	Financing Agreement, dated as of May 1, 2019 among Clovis Oncology, Inc., certain subsidiaries of its subsidiaries named therein, as Guarantors, the Lenders from time to time party thereto, and the Administrative Agent party thereto.
10.39(18)	Pledge and Security Agreement, dated as of May 1, 2019 among each of the Grantors party thereto and the Administrative Agent party thereto.
21.1(15)	List of Subsidiaries of Clovis Oncology, Inc.
31.1	Certification of principal executive officer pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as amended.
31.2	Certification of principal financial officer pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as amended.
32.1	Certification of principal executive officer pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Certification of principal financial officer pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101	The following materials from Clovis Oncology, Inc.’s Quarterly Report on Form 10-Q for the period ended June 30, 2020 formatted in Inline Extensible Business Reporting Language (“iXBRL”): (i) the Consolidated Statements of Operations and Comprehensive Loss, (ii) the Consolidated Balance Sheets, (iii) the Consolidated Statements of Stockholders’ Equity (Deficit), (iv) the Consolidated Statements of Cash Flows and (v) Notes to Unaudited Consolidated Financial Statements.
104	The cover page from Clovis Oncology, Inc.’s Quarterly Report on Form 10-Q for the period ended June 30, 2020 is formatted in iXBRL.

50

(1) Filed as an exhibit with the Registrant’s Registration Statement on Form S-1 (File No. 333-175080) on June 23, 2011.

(2) Filed as an exhibit with the Registrant’s Current Report on Form 8-K (File No. 001-35347) on June 14, 2013.

(3) Filed as an exhibit with Amendment No. 2 to the Registrant’s Registration Statement on Form S-1 (File No. 333-175080) on August 31, 2011.

(4) Filed as an exhibit with Amendment No. 3 to the Registrant’s Registration Statement on Form S-1 (File No. 333-175080) on October 31, 2011.

(5) Filed as an exhibit with the Registrant’s Annual Report on Form 10-K on March 15, 2012.

(6) Filed as an exhibit with the Registrant’s Current Report on Form 8-K (File No. 001-35347) on November 19, 2013.

(7) Filed as an exhibit with the Registrant’s Current Report on Form 8-K (File No. 001-35347) on September 9, 2014.

(8) Filed as an exhibit with the Registrant’s Current Report on Form 8-K (File No. 001-35347) on April 1, 2016.

(9) Filed as an exhibit with the Registrant’s Quarterly Report on Form 10-Q on November 4, 2016.

(10) Filed as an exhibit with the Registrant’s Annual Report on Form 10-K on February 29, 2016.

(11) Filed as an exhibit with the Registrant’s Annual Report on Form 10-K on February 23, 2017.

(12) Filed as an exhibit with the Registrant’s Quarterly Report on Form 10-Q on May 4, 2017.

(13) Filed as an exhibit with the Registrant’s Current Report on Form 8-K (File No. 001-35347) on July 7, 2017.

(14) Filed as an exhibit with the Registrant’s Current Report on Form 8-K (File No. 001-35347) on April 19, 2018.

(15) Filed as an exhibit with the Registrant’s Current Report on Form 10-Q on August 2, 2018.

(16) Filed as an exhibit with the Registrant’s Current Report on Form 8-K (File No. 001-35347) on October 12, 2018.

(17) Filed as an exhibit with the Registrant’s Annual Report on Form 10-K on February 28, 2019.

(18) Filed as an exhibit with the Registrant’s Current Report on Form 8-K (File No. 001-35347) on May 2, 2019.

(19) Filed as an exhibit with the Registrant’s Current Report on Form 8-K (File No. 001-35347) on June 6, 2019.

(20) Filed as an exhibit with the Registrant’s Current Report on Form 8-K (File No. 001-35347) on August 13, 2019.

(21) Filed as an exhibit with the Registrant’s Annual Report on Form 10-K on February 26, 2020.

(22) Filed as an exhibit with the Registrant’s Current Report on Form 8-K (File No. 001-35347) on April 16, 2020.

(23) Filed as an exhibit with the Registrant’s Current Report on Form 8-K (File No. 001-35347) on June 4, 2020.

+     Indicates management contract or compensatory plan.

*     Confidential treatment has been granted with respect to portions of this exhibit, which portions have been omitted and filed separately with the Securities and Exchange Commission.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Date: August 6, 2020	CLOVIS ONCOLOGY, INC.
	By:	/s/ PATRICK J. MAHAFFY
		Patrick J. Mahaffy
		President and Chief Executive Officer; Director
	By:	/s/ DANIEL W. MUEHL
		Daniel W. Muehl
		Executive Vice President and Chief Finance Officer

52

EX-10.4

Exhibit 10.4

Clovis Oncology, Inc.2020 Stock Incentive Plan

1.Purpose.

The purpose of the Plan is to assist the Company in attracting, retaining, motivating, and rewarding certain employees, officers, directors, and consultants of the Company and its Affiliates and promoting the creation of long-term value for stockholders of the Company by closely aligning the interests of such individuals with those of such stockholders. The Plan authorizes the award of Stock-based and cash-based incentives to Eligible Persons to encourage such Eligible Persons to expend maximum effort in the creation of stockholder value.

2.Definitions.

For purposes of the Plan, the following terms shall be defined as set forth below:

(a)“Affiliate” means, with respect to a Person, any other Person that, directly or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with, such Person.

(b)“Award” means any Option, award of Restricted Stock, Restricted Stock Unit, Stock Appreciation Right, or other Stock-based award granted under the Plan.

(c)“Award Agreement” means an Option Agreement, a Restricted Stock Agreement, an RSU Agreement, a SAR Agreement, or an agreement governing the grant of any other Stock-based Award granted under the Plan.

(d)“Board” means the Board of Directors of the Company.

(e)“Cause” means, with respect to a Participant and in the absence of an Award Agreement or Participant Agreement otherwise defining Cause, (1) the Participant’s plea of nolo contendere to, conviction of or indictment for, any crime (whether or not involving the Company or its Affiliates) (i) constituting a felony or (ii) that has, or could reasonably be expected to result in, an adverse impact on the performance of the Participant’s duties to the Service Recipient, or otherwise has, or could reasonably be expected to result in, an adverse impact on the business or reputation of the Company or its Affiliates, (2) conduct of the Participant, in connection with his or her employment or service, that has resulted, or could reasonably be expected to result, in injury to the business or reputation of the Company or its Affiliates, (3) any material violation of the policies of the Service Recipient, including, but not limited to, those relating to sexual harassment or the disclosure or misuse of confidential information, or those set forth in the manuals or statements of policy of the Service Recipient; (4) the Participant’s act(s) of negligence or willful misconduct in the course of his or her employment or service with the Service Recipient; (5) misappropriation by the Participant of any assets or business opportunities of the Company or its Affiliates; (6) embezzlement or fraud committed by the Participant, at the Participant’s direction, or with the Participant’s prior actual knowledge; or (7) willful neglect in the performance of the Participant’s duties for the Service Recipient or willful or repeated failure or refusal to

perform such duties.  If, subsequent to the Termination of a Participant for any reason other than by the Service Recipient for Cause, it is discovered that the Participant’s employment or service could have been terminated for Cause, such Participant’s employment or service shall, at the discretion of the Committee, be deemed to have been terminated by the Service Recipient for Cause for all purposes under the Plan, and the Participant shall be required to repay to the Company all amounts received by him or her in respect of any Award following such Termination that would have been forfeited under the Plan had such Termination been by the Service Recipient for Cause.  In the event that there is an Award Agreement or Participant Agreement defining Cause, “Cause” shall have the meaning provided in such agreement, and a Termination by the Service Recipient for Cause hereunder shall not be deemed to have occurred unless all applicable notice and cure periods in such Award Agreement or Participant Agreement are complied with.

(f)“Change in Control” means:

(1)a change in ownership or control of the Company effected through a transaction or series of transactions (other than an offering of Stock to the general public through a registration statement filed with the U.S. Securities and Exchange Commission or similar non-U.S. regulatory agency or pursuant to a Non-Control Transaction) whereby any “person” (as defined in Section 3(a)(9) of the Exchange Act) or any two or more persons deemed to be one “person” (as used in Sections 13(d)(3) and 14(d)(2) of the Exchange Act), other than the Company or any of its Affiliates, an employee benefit plan sponsored or maintained by the Company or any of its Affiliates (or its related trust), or any underwriter temporarily holding securities pursuant to an offering of such securities, directly or indirectly acquire “beneficial ownership” (within the meaning of Rule 13d-3 under the Exchange Act) of securities of the Company possessing more than fifty percent (50%) of the total combined voting power of the Company’s securities eligible to vote in the election of the Board (the “Company Voting Securities”);

(2)the date, within any consecutive twenty-four (24) month period commencing on or after the Effective Date, upon which individuals who constitute the Board as of the Effective Date (the “Incumbent Board”) cease for any reason to constitute at least a majority of the Board; provided, however, that any individual who becomes a director subsequent to the Effective Date whose election or nomination for election by the Company’s stockholders was approved by a vote of at least a majority of the directors then constituting the Incumbent Board (either by a specific vote or by approval of the proxy statement of the Company in which such individual is named as a nominee for director, without objection to such nomination) shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest (including, but not limited to, a consent solicitation) with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a person other than the Board; or

(3)the consummation of a merger, consolidation, share exchange, or similar form of corporate transaction involving the Company or any of its Affiliates that requires the approval of the Company’s stockholders (whether for such transaction, the issuance of securities in the transaction or otherwise) (a “Reorganization”), unless

immediately following such Reorganization (i) more than fifty percent (50%) of the total voting power of (A) the corporation resulting from such Reorganization (the “Surviving Company”) or (B) if applicable, the ultimate parent corporation that has, directly or indirectly, beneficial ownership of one hundred percent (100%) of the voting securities of the Surviving Company (the “Parent Company”), is represented by Company Voting Securities that were outstanding immediately prior to such Reorganization (or, if applicable, is represented by shares into which such Company Voting Securities were converted pursuant to such Reorganization), and such voting power among the holders thereof is in substantially the same proportion as the voting power of such Company Voting Securities among holders thereof immediately prior to such Reorganization, (ii) no person, other than an employee benefit plan sponsored or maintained by the Surviving Company or the Parent Company (or its related trust), is or becomes the beneficial owner, directly or indirectly, of fifty percent (50%) or more of the total voting power of the outstanding voting securities eligible to elect directors of the Parent Company, or if there is no Parent Company, the Surviving Company, and (iii) at least a majority of the members of the board of directors of the Parent Company, or if there is no Parent Company, the Surviving Company, following the consummation of such Reorganization are members of the Incumbent Board at the time of the Board’s approval of the execution of the initial agreement providing for such Reorganization (any Reorganization which satisfies all of the criteria specified in clauses (i), (ii), and (iii) above shall be a “Non-Control Transaction”); or

(4)the sale or disposition, in one or a series of related transactions, of all or substantially all of the assets of the Company to any “person” (as defined in Section 3(a)(9) of the Exchange Act) or to any two or more persons deemed to be one “person” (as used in Sections 13(d)(3) and 14(d)(2) of the Exchange Act) other than the Company’s Affiliates.

Notwithstanding the foregoing, (x) a Change in Control shall not be deemed to occur solely because any person acquires beneficial ownership of fifty percent (50%) or more of the Company Voting Securities as a result of an acquisition of Company Voting Securities by the Company that reduces the number of Company Voting Securities outstanding; provided that if after such acquisition by the Company such person becomes the beneficial owner of additional Company Voting Securities that increases the percentage of outstanding Company Voting Securities beneficially owned by such person, a Change in Control shall then be deemed to occur, and (y) with respect to the payment of any amount that constitutes a deferral of compensation subject to Section 409A of the Code payable upon a Change in Control, a Change in Control shall not be deemed to have occurred, unless the Change in Control constitutes a change in the ownership or effective control of the Company or in the ownership of a substantial portion of the assets of the Company under Section 409A(a)(2)(A)(v) of the Code.

(g)“Code” means the U.S. Internal Revenue Code of 1986, as amended from time to time, including the rules and regulations thereunder and any successor provisions, rules and regulations thereto.

(h)“Committee” means the Board, the Compensation Committee of the Board or such other committee consisting of two or more individuals appointed by the Board to

administer the Plan and each other individual or committee of individuals designated to exercise authority under the Plan.

(i)“Company” means Clovis Oncology, Inc., a Delaware corporation.

(j)“Corporate Event” has the meaning set forth in Section 10(b) hereof.

(k)“Data” has the meaning set forth in Section 20(f) hereof.

(l)“Disability” means, in the absence of an Award Agreement or Participant Agreement otherwise defining Disability, the permanent and total disability of such Participant within the meaning of Section 22(e)(3) of the Code.  In the event that there is an Award Agreement or Participant Agreement defining Disability, “Disability” shall have the meaning provided in such Award Agreement or Participant Agreement.

(m)“Disqualifying Disposition” means any disposition (including any sale) of Stock acquired upon the exercise of an Incentive Stock Option made within the period that ends either (1) two years after the date on which the Participant was granted the Incentive Stock Option or (2) one year after the date upon which the Participant acquired the Stock.

(n)“Effective Date” means April 22, 2020, which is the date on which the Plan was approved by the Board.

(o)“Eligible Person” means (1) each employee and officer of the Company or any of its Affiliates, (2) each non-employee director of the Company or any of its Affiliates; (3) each other natural Person who provides substantial services to the Company or any of its Affiliates as a consultant or advisor (or a wholly owned alter ego entity of the natural Person providing such services of which such Person is an employee, stockholder or partner) and who is designated as eligible by the Committee, and (4) each natural Person who has been offered employment by the Company or any of its Affiliates; provided that such prospective employee may not receive any payment or exercise any right relating to an Award until such Person has commenced employment or service with the Company or its Affiliates; provided further, however, that (i) with respect to any Award that is intended to qualify as a “stock right” that does not provide for a “deferral of compensation” within the meaning of Section 409A of the Code, the term “Affiliate” as used in this Section 2(o) shall include only those corporations or other entities in the unbroken chain of corporations or other entities beginning with the Company where each of the corporations or other entities in the unbroken chain other than the last corporation or other entity owns stock possessing at least fifty percent (50%) or more of the total combined voting power of all classes of stock in one of the other corporations or other entities in the chain, and (ii) with respect to any Award that is intended to be an Incentive Stock Option, the term “Affiliate” as used in this Section 2(o) shall include only those entities that qualify as a “subsidiary corporation” with respect to the Company within the meaning of Section 424(f) of the Code.  An employee on an approved leave of absence may be considered as still in the employ of the Company or any of its Affiliates for purposes of eligibility for participation in the Plan.

(p)“Exchange Act” means the U.S. Securities Exchange Act of 1934, as amended from time to time, including the rules and regulations thereunder and any successor provisions, rules and regulations thereto.

(q)“Expiration Date” means, with respect to an Option or Stock Appreciation Right, the date on which the term of such Option or Stock Appreciation Right expires, as determined under Sections 5(b) or 8(b) hereof, as applicable.

(r)“Fair Market Value” means, as of any date when the Stock is listed on one or more national securities exchanges, the closing price reported on the principal national securities exchange on which such Stock is listed and traded on the date of determination or, if the closing price is not reported on such date of determination, the closing price reported on the most recent date prior to the date of determination.  If the Stock is not listed on a national securities exchange, “Fair Market Value” shall mean the amount determined by the Board in good faith, and in a manner consistent with Section 409A of the Code, to be the fair market value per share of Stock.

(s)“GAAP” means the U.S. Generally Accepted Accounting Principles, as in effect from time to time.

(t)“Incentive Stock Option” means an Option intended to qualify as an “incentive stock option” within the meaning of Section 422 of the Code.

(u)“Nonqualified Stock Option” means an Option not intended to be an Incentive Stock Option.

(v)“Option” means a conditional right, granted to a Participant under Section 4(e) hereof, to purchase Stock at a specified price during a specified time period.

(w)“Option Agreement” means a written agreement between the Company and a Participant evidencing the terms and conditions of an individual Option Award.

(x)“Participant” means an Eligible Person who has been granted an Award under the Plan or, if applicable, such other Person who holds an Award.

(y)“Participant Agreement” means an employment or other services agreement between a Participant and the Service Recipient that describes the terms and conditions of such Participant’s employment or service with the Service Recipient and is effective as of the date of determination.

(z)“Person” means any individual, corporation, partnership, firm, joint venture, association, joint-stock company, trust, unincorporated organization, or other entity.

(aa)“Plan” means this Clovis Oncology, Inc. 2020 Stock Incentive Plan, as amended from time to time.

(bb)“Qualified Member” means a member of the Committee who is a “Non-Employee Director” within the meaning of Rule 16b-3 under the Exchange Act and an “independent director” as defined under, as applicable, the NASDAQ Listing Rules, the NYSE Listed Company Manual or other applicable stock exchange rules.

(cc)“Qualifying Committee” has the meaning set forth in Section 3(b) hereof.

(dd)“Restricted Stock” means Stock granted to a Participant under Section 6 hereof that is subject to certain restrictions and to a risk of forfeiture.

(ee)“Restricted Stock Agreement” means a written agreement between the Company and a Participant evidencing the terms and conditions of an individual Restricted Stock Award.

(ff)“Restricted Stock Unit” means a notional unit representing the right to receive one share of Stock (or the cash value of one share of Stock, if so determined by the Committee) on a specified settlement date.

(gg)“RSU Agreement” means a written agreement between the Company and a Participant evidencing the terms and conditions of an individual Award of Restricted Stock Units.

(hh)“SAR Agreement” means a written agreement between the Company and a Participant evidencing the terms and conditions of an individual Award of Stock Appreciation Rights.

(ii)“Securities Act” means the U.S. Securities Act of 1933, as amended from time to time, including the rules and regulations thereunder and any successor provisions, rules and regulations thereto.

(jj)“Service Recipient” means, with respect to a Participant holding an Award, either the Company or an Affiliate of the Company by which the original recipient of such Award is, or following a Termination was most recently, principally employed or to which such original recipient provides, or following a Termination was most recently providing, services, as applicable.

(kk)“Stock” means Common Stock, par value $0.001 per share, of the Company, and such other securities as may be substituted for such stock pursuant to Section 10 hereof.

(ll)“Stock Appreciation Right” means a conditional right to receive an amount equal to the value of the appreciation in the Stock over a specified period.  Except in the event of extraordinary circumstances, as determined in the sole discretion of the Committee, or pursuant to Section 10(b) hereof, Stock Appreciation Rights shall be settled in Stock.

(mm)“Substitute Award” has the meaning set forth in Section 4(a) hereof.

(nn)“Termination” means the termination of a Participant’s employment or service, as applicable, with the Service Recipient; provided, however, that, if so determined by the Committee at the time of any change in status in relation to the Service Recipient (e.g., a Participant ceases to be an employee and begins providing services as a consultant, or vice versa), such change in status will not be deemed a Termination hereunder.  Unless otherwise determined by the Committee, in the event that the Service Recipient ceases to be an Affiliate of the Company (by reason of sale, divestiture, spin-off, or other similar transaction), unless a Participant’s employment or service is transferred to another entity that would constitute the Service Recipient immediately following such transaction, such Participant shall be deemed to have suffered a

Termination hereunder as of the date of the consummation of such transaction.  Notwithstanding anything herein to the contrary, a Participant’s change in status in relation to the Service Recipient (for example, a change from employee to consultant) shall not be deemed a Termination hereunder with respect to any Awards constituting “nonqualified deferred compensation” subject to Section 409A of the Code that are payable upon a Termination unless such change in status constitutes a “separation from service” within the meaning of Section 409A of the Code.  Any payments in respect of an Award constituting nonqualified deferred compensation subject to Section 409A of the Code that are payable upon a Termination shall be delayed for such period as may be necessary to meet the requirements of Section 409A(a)(2)(B)(i) of the Code.  On the first business day following the expiration of such period, the Participant shall be paid, in a single lump sum without interest, an amount equal to the aggregate amount of all payments delayed pursuant to the preceding sentence, and any remaining payments not so delayed shall continue to be paid pursuant to the payment schedule applicable to such Award.

3.Administration.

(a)Authority of the Committee.  Except as otherwise provided below, the Plan shall be administered by the Committee.  The Committee shall have full and final authority, in each case subject to and consistent with the provisions of the Plan, to (1) select Eligible Persons to become Participants, (2) grant Awards, (3) determine the type, number and type of shares of Stock subject to, other terms and conditions of, and all other matters relating to, Awards, (4) prescribe Award Agreements (which need not be identical for each Participant) and rules and regulations for the administration of the Plan, (5) construe and interpret the Plan and Award Agreements and correct defects, supply omissions, and reconcile inconsistencies therein, (6) suspend the right to exercise Awards during any period that the Committee deems appropriate to comply with applicable securities laws, and thereafter extend the exercise period of an Award by an equivalent period of time or such shorter period required by, or necessary to comply with, applicable law, and (7) make all other decisions and determinations as the Committee may deem necessary or advisable for the administration of the Plan.  Any action of the Committee shall be final, conclusive, and binding on all Persons, including, without limitation, the Company, its stockholders and Affiliates, Eligible Persons, Participants, and beneficiaries of Participants.  Notwithstanding anything in the Plan to the contrary, the Committee shall have the ability to accelerate the vesting of any outstanding Award at any time and for any reason, including upon a Corporate Event, subject to Section 10(d), or in the event of a Participant’s Termination by the Service Recipient other than for Cause, or due to the Participant’s death, Disability or retirement (as such term may be defined in an applicable Award Agreement or Participant Agreement, or, if no such definition exists, in accordance with the Company’s then-current employment policies and guidelines).  For the avoidance of doubt, the Board shall have the authority to take all actions under the Plan that the Committee is permitted to take.

(b)Manner of Exercise of Committee Authority.  At any time that a member of the Committee is not a Qualified Member, any action of the Committee relating to an Award granted or to be granted to a Participant who is then subject to Section 16 of the Exchange Act in respect of the Company, must be taken by the remaining members of the Committee or a subcommittee, designated by the Committee or the Board, composed solely of two or more Qualified Members (a “Qualifying Committee”).  Any action authorized by such a Qualifying Committee shall be deemed the action of the Committee for purposes of the Plan.  The express

grant of any specific power to a Qualifying Committee, and the taking of any action by such a Qualifying Committee, shall not be construed as limiting any power or authority of the Committee.

(c)Delegation.  To the extent permitted by applicable law, the Committee may delegate to officers or employees of the Company or any of its Affiliates, or committees thereof, the authority, subject to such terms as the Committee shall determine, to perform such functions under the Plan, including, but not limited to, administrative functions, as the Committee may determine appropriate.  The Committee may appoint agents to assist it in administering the Plan.  Any actions taken by an officer or employee delegated authority pursuant to this Section 3(c) within the scope of such delegation shall, for all purposes under the Plan, be deemed to be an action taken by the Committee.  Notwithstanding the foregoing or any other provision of the Plan to the contrary, any Award granted under the Plan to any Eligible Person who is not an employee of the Company or any of its Affiliates (including any non-employee director of the Company or any Affiliate) or to any Eligible Person who is subject to Section 16 of the Exchange Act must be expressly approved by the Committee or Qualifying Committee in accordance with Section 3(b) above.

(d)Sections 409A and 457A.  The Committee shall take into account compliance with Sections 409A and 457A of the Code in connection with any grant of an Award under the Plan, to the extent applicable.  While the Awards granted hereunder are intended to be structured in a manner to avoid the imposition of any penalty taxes under Sections 409A and 457A of the Code, in no event whatsoever shall the Company or any of its Affiliates be liable for any additional tax, interest, or penalties that may be imposed on a Participant as a result of Section 409A or Section 457A of the Code or any damages for failing to comply with Section 409A or Section 457A of the Code or any similar state or local laws (other than for withholding obligations or other obligations applicable to employers, if any, under Section 409A or Section 457A of the Code).

4.Shares Available Under the Plan; Other Limitations.

(a)Number of Shares Available for Delivery.  Subject to adjustment as provided in Section 10 hereof, the total number of shares of Stock reserved and available for delivery in connection with Awards under the Plan shall equal 6,470,000.  Shares of Stock delivered under the Plan shall consist of authorized and unissued shares or previously issued shares of Stock reacquired by the Company on the open market or by private purchase.  Notwithstanding the foregoing, (i) except as may be required by reason of Section 422 of the Code, the number of shares of Stock available for issuance hereunder shall not be reduced by shares issued pursuant to Awards issued or assumed in connection with a merger or acquisition as contemplated by, as applicable, NYSE Listed Company Manual Section 303A.08, NASDAQ Listing Rule 5635(c) and IM-5635-1, AMEX Company Guide Section 711, or other applicable stock exchange rules, and their respective successor rules and listing exchange promulgations (each such Award, a “Substitute Award”); and (ii) shares of Stock shall not be deemed to have been issued pursuant to the Plan with respect to any portion of an Award that is settled in cash.

(b)Share Counting Rules.  The Committee may adopt reasonable counting procedures to ensure appropriate counting, avoid double-counting (as, for example, in the case of tandem awards or Substitute Awards) and make adjustments if the number of shares of Stock

actually delivered differs from the number of shares previously counted in connection with an Award.  Other than with respect to a Substitute Award, to the extent that an Award expires or is canceled, forfeited, settled in cash, or otherwise terminated without delivery to the Participant of the full number of shares of Stock to which the Award related, the undelivered shares of Stock will again be available for grant.  Shares of Stock withheld or surrendered in payment of the exercise price of an Option or taxes relating to an Award shall not be deemed to constitute shares delivered to the Participant and shall be deemed to again be available for delivery under the Plan.  Shares of Stock withheld or surrendered in payment of the exercise price of a Stock Appreciation Right shall be deemed to constitute shares delivered to the Participant and shall not be deemed to again be available for delivery under the Plan.

(c)Incentive Stock Options.  No more than 6,470,000 shares of Stock (subject to adjustment as provided in Section 10 hereof) reserved for issuance hereunder may be issued or transferred upon exercise or settlement of Incentive Stock Options.

(d)Minimum Vesting Period.  No Award may begin to vest prior to the one (1) year anniversary of the date of grant; provided, however, that the foregoing minimum vesting period shall not apply (i) to Awards granted in payment of or exchange for an equivalent amount of cash (e.g., salary, bonus or other earned cash compensation); (ii) to a Substitute Award that does not reduce the vesting period of the award being replaced or assumed; or (iii) to Awards involving an aggregate number of shares of Stock not in excess of five percent (5%) of the aggregate number of shares of Stock that may be delivered in connection with Awards (as set forth in Section 4(a) hereof).

(e)Shares Available Under Acquired Plans.  To the extent permitted by NYSE Listed Company Manual Section 303A.08, NASDAQ Listing Rule 5635(c) or other applicable stock exchange rules, subject to applicable law, in the event that a company acquired by the Company or with which the Company combines has shares available under a pre-existing plan approved by stockholders and not adopted in contemplation of such acquisition or combination, the shares available for grant pursuant to the terms of such pre-existing plan (as adjusted, to the extent appropriate, using the exchange ratio or other adjustment or valuation ratio of formula used in such acquisition or combination to determine the consideration payable to the holders of common stock of the entities party to such acquisition or combination) may be used for Awards under the Plan and shall not reduce the number of shares of Stock reserved and available for delivery in connection with Awards under the Plan; provided that Awards using such available shares shall not be made after the date awards could have been made under the terms of such pre-existing plan, absent the acquisition or combination, and shall only be made to individuals who were not employed by the Company or any subsidiary of the Company immediately prior to such acquisition or combination.

5.Options.

(a)General.  Certain Options granted under the Plan may be intended to be Incentive Stock Options; however, no Incentive Stock Options may be granted hereunder following the tenth (10th) anniversary of the earlier of (i) the date the Plan is adopted by the Board and (ii) the date the stockholders of the Company approve the Plan.  Options may be granted to Eligible Persons in such form and having such terms and conditions as the Committee shall deem

appropriate; provided, however, that Incentive Stock Options may be granted only to Eligible Persons who are employees of the Company or an Affiliate (as such definition is limited pursuant to Section 2(o) hereof) of the Company.  The provisions of separate Options shall be set forth in separate Option Agreements, which agreements need not be identical.  No dividends or dividend equivalents shall be paid on Options.  

(b)Term.  The term of each Option shall be set by the Committee at the time of grant; provided, however, that no Option granted hereunder shall be exercisable after, and each Option shall expire, ten (10) years from the date it was granted.

(c)Exercise Price.  The exercise price per share of Stock for each Option shall be set by the Committee at the time of grant and shall not be less than the Fair Market Value on the date of grant, subject to Section 5(g) hereof in the case of any Incentive Stock Option.  Notwithstanding the foregoing, in the case of an Option that is a Substitute Award, the exercise price per share of Stock for such Option may be less than the Fair Market Value on the date of grant; provided, that such exercise price is determined in a manner consistent with the provisions of Section 409A of the Code and, if applicable, Section 424(a) of the Code.

(d)Payment for Stock.  Payment for shares of Stock acquired pursuant to an Option granted hereunder shall be made in full upon exercise of the Option in a manner approved by the Committee, which may include any of the following payment methods:  (1) in immediately available funds in U.S. dollars, or by certified or bank cashier’s check, (2)  by delivery of shares of Stock having a value equal to the exercise price, (3) by a broker-assisted cashless exercise in accordance with procedures approved by the Committee, whereby payment of the Option exercise price or tax withholding obligations may be satisfied, in whole or in part, with shares of Stock subject to the Option by delivery of an irrevocable direction to a securities broker (on a form prescribed by the Committee) to sell shares of Stock and to deliver all or part of the sale proceeds to the Company in payment of the aggregate exercise price and, if applicable, the amount necessary to satisfy the Company’s withholding obligations, or (4) by any other means approved by the Committee (including, by delivery of a notice of “net exercise” to the Company, pursuant to which the Participant shall receive the number of shares of Stock underlying the Option so exercised reduced by the number of shares of Stock equal to the aggregate exercise price of the Option divided by the Fair Market Value on the date of exercise).  Notwithstanding anything herein to the contrary, if the Committee determines that any form of payment available hereunder would be in violation of Section 402 of the Sarbanes-Oxley Act of 2002, such form of payment shall not be available.

(e)Vesting.  Options shall vest and become exercisable in such manner, on such date or dates, or upon the achievement of performance or other conditions, in each case as may be determined by the Committee and set forth in an Option Agreement; provided, however, that notwithstanding any such vesting dates, subject to Section 4(d), the Committee may in its sole discretion accelerate the vesting of any Option at any time and for any reason.  Unless otherwise specifically determined by the Committee, the vesting of an Option shall occur only while the Participant is employed by or rendering services to the Service Recipient, and all vesting shall cease upon a Participant’s Termination for any reason.  To the extent permitted by applicable law and unless otherwise determined by the Committee, vesting shall be suspended during the period of any approved unpaid leave of absence by a Participant following which the Participant has a

right to reinstatement and shall resume upon such Participant’s return to active employment.  If an Option is exercisable in installments, such installments or portions thereof that become exercisable shall remain exercisable until the Option expires, is canceled or otherwise terminates.

(f)Termination of Employment or Service.  Except as provided by the Committee in an Option Agreement, Participant Agreement or otherwise:

(1)In the event of a Participant’s Termination prior to the applicable Expiration Date for any reason other than (i) by the Service Recipient for Cause, or (ii) by reason of the Participant’s death or Disability, (A) all vesting with respect to such Participant’s Options outstanding shall cease, (B) all of such Participant’s unvested Options outstanding shall terminate and be forfeited for no consideration as of the date of such Termination, and (C) all of such Participant’s vested Options outstanding shall terminate and be forfeited for no consideration on the earlier of (x) the applicable Expiration Date and (y) the date that is ninety (90) days after the date of such Termination.

(2)In the event of a Participant’s Termination prior to the applicable Expiration Date by reason of such Participant’s death or Disability, (i) all vesting with respect to such Participant’s Options outstanding shall cease, (ii) all of such Participant’s unvested Options outstanding shall terminate and be forfeited for no consideration as of the date of such Termination, and (iii) all of such Participant’s vested Options outstanding shall terminate and be forfeited for no consideration on the earlier of (x) the applicable Expiration Date and (y) the date that is twelve (12) months after the date of such Termination.  In the event of a Participant’s death, such Participant’s Options shall remain exercisable by the Person or Persons to whom such Participant’s rights under the Options pass by will or by the applicable laws of descent and distribution until the applicable Expiration Date, but only to the extent that the Options were vested as the time of such Termination.

(3)In the event of a Participant’s Termination prior to the applicable Expiration Date by the Service Recipient for Cause, all of such Participant’s Options outstanding (whether or not vested) shall immediately terminate and be forfeited for no consideration as of the date of such Termination.

(g)Special Provisions Applicable to Incentive Stock Options.

(1)No Incentive Stock Option may be granted to any Eligible Person who, at the time the Option is granted, owns directly, or indirectly within the meaning of Section 424(d) of the Code, stock possessing more than ten percent (10%) of the total combined voting power of all classes of stock of the Company or of any parent or subsidiary thereof, unless such Incentive Stock Option (i) has an exercise price of at least one hundred ten percent (110%) of the Fair Market Value on the date of the grant of such Option and (ii) cannot be exercised more than five (5) years after the date it is granted.

(2)To the extent that the aggregate Fair Market Value (determined as of the date of grant) of Stock for which Incentive Stock Options are exercisable for the first time by any Participant during any calendar year (under all plans of the Company and its

Affiliates) exceeds $100,000, such excess Incentive Stock Options shall be treated as Nonqualified Stock Options.

(3)Each Participant who receives an Incentive Stock Option must agree to notify the Company in writing immediately after the Participant makes a Disqualifying Disposition of any Stock acquired pursuant to the exercise of an Incentive Stock Option.

6.Restricted Stock.

(a)General.  Restricted Stock may be granted to Eligible Persons in such form and having such terms and conditions as the Committee shall deem appropriate.  The provisions of separate Awards of Restricted Stock shall be set forth in separate Restricted Stock Agreements, which agreements need not be identical.  Subject to the restrictions set forth in Section 6(b) hereof, and except as otherwise set forth in the applicable Restricted Stock Agreement, the Participant shall generally have the rights and privileges of a stockholder as to such Restricted Stock, including the right to vote such Restricted Stock.  Cash dividends and stock dividends, if any, with respect to the Restricted Stock shall be withheld by the Company for the Participant’s account, and shall be subject to forfeiture to the same degree as the shares of Restricted Stock to which such dividends relate.  Except as otherwise determined by the Committee, no interest will accrue or be paid on the amount of any cash dividends withheld.

(b)Vesting and Restrictions on Transfer.  Restricted Stock shall vest in such manner, on such date or dates, or upon the achievement of performance or other conditions, in each case as may be determined by the Committee and set forth in a Restricted Stock Agreement; provided, however, that notwithstanding any such vesting dates, subject to Section 4(d), the Committee may in its sole discretion accelerate the vesting of any Award of Restricted Stock at any time and for any reason.  Unless otherwise specifically determined by the Committee, the vesting of an Award of Restricted Stock shall occur only while the Participant is employed by or rendering services to the Service Recipient, and all vesting shall cease upon a Participant’s Termination for any reason.  To the extent permitted by applicable law and unless otherwise determined by the Committee, vesting shall be suspended during the period of any approved unpaid leave of absence by a Participant following which the Participant has a right to reinstatement and shall resume upon such Participant’s return to active employment.  In addition to any other restrictions set forth in a Participant’s Restricted Stock Agreement, the Participant shall not be permitted to sell, transfer, pledge, or otherwise encumber the Restricted Stock prior to the time the Restricted Stock has vested pursuant to the terms of the Restricted Stock Agreement.

(c)Termination of Employment or Service.  Except as provided by the Committee in a Restricted Stock Agreement, Participant Agreement or otherwise, in the event of a Participant’s Termination for any reason prior to the time that such Participant’s Restricted Stock has vested, (1) all vesting with respect to such Participant’s Restricted Stock outstanding shall cease, and (2) as soon as practicable following such Termination, the Company shall repurchase from the Participant, and the Participant shall sell, all of such Participant’s unvested shares of Restricted Stock at a purchase price equal to the lesser of (A) the original purchase price paid for the Restricted Stock (as adjusted for any subsequent changes in the outstanding Stock or in the capital structure of the Company) less any dividends or other distributions or bonus received (or to be received) by the Participant (or any transferee) in respect of such Restricted Stock prior

to the date of repurchase and (B) the Fair Market Value of the Stock on the date of such repurchase; provided that, if the original purchase price paid for the Restricted Stock is equal to zero dollars ($0), such unvested shares of Restricted Stock shall be forfeited to the Company by the Participant for no consideration as of the date of such Termination.

7.Restricted Stock Units.

(a)General.  Restricted Stock Units may be granted to Eligible Persons in such form and having such terms and conditions as the Committee shall deem appropriate.  The provisions of separate Restricted Stock Units shall be set forth in separate RSU Agreements, which agreements need not be identical.

(b)Vesting.  Restricted Stock Units shall vest in such manner, on such date or dates, or upon the achievement of performance or other conditions, in each case as may be determined by the Committee and set forth in an RSU Agreement; provided, however, that notwithstanding any such vesting dates, subject to Section 4(d), the Committee may in its sole discretion accelerate the vesting of any Restricted Stock Unit at any time and for any reason.  Unless otherwise specifically determined by the Committee, the vesting of a Restricted Stock Unit shall occur only while the Participant is employed by or rendering services to the Service Recipient, and all vesting shall cease upon a Participant’s Termination for any reason.  To the extent permitted by applicable law and unless otherwise determined by the Committee, vesting shall be suspended during the period of any approved unpaid leave of absence by a Participant following which the Participant has a right to reinstatement and shall resume upon such Participant’s return to active employment.  

(c)Settlement.  Restricted Stock Units shall be settled in Stock, cash, or property, as determined by the Committee, in its sole discretion, on the date or dates determined by the Committee and set forth in an RSU Agreement.  A Participant shall not be entitled to dividends, if any, or dividend equivalents with respect to Restricted Stock Units prior to settlement.

(d)Termination of Employment or Service.  Except as provided by the Committee in an RSU Agreement, Participant Agreement or otherwise, in the event of a Participant’s Termination for any reason prior to the time that such Participant’s Restricted Stock Units have been settled, (1) all vesting with respect to such Participant’s Restricted Stock Units outstanding shall cease, (2) all of such Participant’s unvested Restricted Stock Units outstanding shall be forfeited for no consideration as of the date of such Termination, and (3) any shares remaining undelivered with respect to vested Restricted Stock Units then held by such Participant shall be delivered on the delivery date or dates specified in the RSU Agreement.

8.Stock Appreciation Rights.

(a)General.  Stock Appreciation Rights may be granted to Eligible Persons in such form and having such terms and conditions as the Committee shall deem appropriate.  The provisions of separate Stock Appreciation Rights shall be set forth in separate SAR Agreements, which agreements need not be identical.  No dividends or dividend equivalents shall be paid on Stock Appreciation Rights.

(b)Term.  The term of each Stock Appreciation Right shall be set by the Committee at the time of grant; provided, however, that no Stock Appreciation Right granted hereunder shall be exercisable after, and each Stock Appreciation Right shall expire, ten (10) years from the date it was granted.

(c)Base Price.  The base price per share of Stock for each Stock Appreciation Right shall be set by the Committee at the time of grant and shall not be less than the Fair Market Value on the date of grant.  Notwithstanding the foregoing, in the case of a Stock Appreciation Right that is a Substitute Award, the base price per share of Stock for such Stock Appreciation Right may be less than the Fair Market Value on the date of grant; provided, that such base price is determined in a manner consistent with the provisions of Section 409A of the Code.

(d)Vesting.  Stock Appreciation Rights shall vest and become exercisable in such manner, on such date or dates, or upon the achievement of performance or other conditions, in each case as may be determined by the Committee and set forth in a SAR Agreement; provided, however, that notwithstanding any such vesting dates, subject to Section 4(d), the Committee may in its sole discretion accelerate the vesting of any Stock Appreciation Right at any time and for any reason.  Unless otherwise specifically determined by the Committee, the vesting of a Stock Appreciation Right shall occur only while the Participant is employed by or rendering services to the Service Recipient, and all vesting shall cease upon a Participant’s Termination for any reason.  To the extent permitted by applicable law and unless otherwise determined by the Committee, vesting shall be suspended during the period of any approved unpaid leave of absence by a Participant following which the Participant has a right to reinstatement and shall resume upon such Participant’s return to active employment.  If a Stock Appreciation Right is exercisable in installments, such installments or portions thereof that become exercisable shall remain exercisable until the Stock Appreciation Right expires, is canceled or otherwise terminates.

(e)Payment upon Exercise.  Payment upon exercise of a Stock Appreciation Right may be made in cash, Stock, or property as specified in the SAR Agreement or determined by the Committee, in each case having a value in respect of each share of Stock underlying the portion of the Stock Appreciation Right so exercised, equal to the difference between the base price of such Stock Appreciation Right and the Fair Market Value of one (1) share of Stock on the exercise date.  For purposes of clarity, each share of Stock to be issued in settlement of a Stock Appreciation Right is deemed to have a value equal to the Fair Market Value of one (1) share of Stock on the exercise date.  In no event shall fractional shares be issuable upon the exercise of a Stock Appreciation Right, and in the event that fractional shares would otherwise be issuable, the number of shares issuable will be rounded down to the next lower whole number of shares, and the Participant will be entitled to receive a cash payment equal to the value of such fractional share.

(f)Termination of Employment or Service.  Except as provided by the Committee in a SAR Agreement, Participant Agreement or otherwise:

(1)In the event of a Participant’s Termination prior to the applicable Expiration Date for any reason other than (i) by the Service Recipient for Cause, or (ii) by reason of the Participant’s death or Disability, (A) all vesting with respect to such Participant’s Stock Appreciation Rights outstanding shall cease, (B) all of such Participant’s unvested Stock Appreciation Rights outstanding shall terminate and be

forfeited for no consideration as of the date of such Termination, and (C) all of such Participant’s vested Stock Appreciation Rights outstanding shall terminate and be forfeited for no consideration on the earlier of (x) the applicable Expiration Date and (y) the date that is ninety (90) days after the date of such Termination.

(2)In the event of a Participant’s Termination prior to the applicable Expiration Date by reason of such Participant’s death or Disability, (i) all vesting with respect to such Participant’s Stock Appreciation Rights outstanding shall cease, (ii) all of such Participant’s unvested Stock Appreciation Rights outstanding shall terminate and be forfeited for no consideration as of the date of such Termination, and (iii) all of such Participant’s vested Stock Appreciation Rights outstanding shall terminate and be forfeited for no consideration on the earlier of (x) the applicable Expiration Date and (y) the date that is twelve (12) months after the date of such Termination.  In the event of a Participant’s death, such Participant’s Stock Appreciation Rights shall remain exercisable by the Person or Persons to whom such Participant’s rights under the Stock Appreciation Rights pass by will or by the applicable laws of descent and distribution until the applicable Expiration Date, but only to the extent that the Stock Appreciation Rights were vested at the time of such Termination.

(3)In the event of a Participant’s Termination prior to the applicable Expiration Date by the Service Recipient for Cause, all of such Participant’s Stock Appreciation Rights outstanding (whether or not vested) shall immediately terminate and be forfeited for no consideration as of the date of such Termination.

9.Other Stock-Based Awards.

The Committee is authorized, subject to limitations under applicable law, to grant to Participants such other Awards that may be denominated or payable in, valued in whole or in part by reference to, or otherwise based upon or related to Stock, as deemed by the Committee to be consistent with the purposes of the Plan. The Committee may also grant Stock as a bonus (whether or not subject to any vesting requirements or other restrictions on transfer), and may grant other Awards in lieu of obligations of the Company or an Affiliate to pay cash or deliver other property under the Plan or under other plans or compensatory arrangements, subject to such terms as shall be determined by the Committee. The terms and conditions applicable to such Awards shall be determined by the Committee and evidenced by Award Agreements, which agreements need not be identical.

10.Adjustment for Recapitalization, Merger, etc.

(a)Capitalization Adjustments.  The aggregate number of shares of Stock that may be delivered in connection with Awards (as set forth in Section 4 hereof), the numerical share limits in Section 4(a) hereof, the number of shares of Stock covered by each outstanding Award, and the price per share of Stock underlying each such Award shall be equitably and proportionally adjusted or substituted, as determined by the Committee, in its sole discretion, as to the number, price, or kind of a share of Stock or other consideration subject to such Awards (1) in the event of changes in the outstanding Stock or in the capital structure of the Company by reason of stock dividends, extraordinary cash dividends, stock splits, reverse stock splits, recapitalizations, reorganizations, mergers, amalgamations, consolidations, combinations, exchanges, or other

relevant changes in capitalization occurring after the date of grant of any such Award (including any Corporate Event); (2) in connection with any extraordinary dividend declared and paid in respect of shares of Stock, whether payable in the form of cash, stock, or any other form of consideration; or (3) in the event of any change in applicable laws or circumstances that results in or could result in, in either case, as determined by the Committee in its sole discretion, any substantial dilution or enlargement of the rights intended to be granted to, or available for, Participants in the Plan.

(b)Corporate Events.  Notwithstanding the foregoing, except as provided by the Committee in an Award Agreement, Participant Agreement or otherwise, in connection with (i) a merger, amalgamation, or consolidation involving the Company in which the Company is not the surviving corporation, (ii) a merger, amalgamation, or consolidation involving the Company in which the Company is the surviving corporation but the holders of shares of Stock receive securities of another corporation or other property or cash, (iii) a Change in Control, or (iv) the reorganization, dissolution or liquidation of the Company (each, a “Corporate Event”), the Committee may provide for any one or more of the following:

(1)The assumption or substitution of any or all Awards in connection with such Corporate Event, in which case the Awards shall be subject to the adjustment set forth in Section 10(a) above;

(2)The acceleration of vesting of any or all Awards not assumed or substituted in connection with such Corporate Event, subject to the consummation of such Corporate Event;

(3)The cancellation of any or all Awards not assumed or substituted in connection with such Corporate Event (whether vested or unvested) as of the consummation of such Corporate Event, together with the payment to the Participants holding vested Awards (including any Awards that would vest upon the Corporate Event but for such cancellation) so canceled of an amount in respect of cancellation equal to the amount payable pursuant to any Cash Award or, with respect to other Awards, an amount based upon the per-share consideration being paid for the Stock in connection with such Corporate Event, less, in the case of Options, Stock Appreciation Rights, and other Awards subject to exercise, the applicable exercise or base price; provided, however, that holders of Options, Stock Appreciation Rights, and other Awards subject to exercise shall be entitled to consideration in respect of cancellation of such Awards only if the per-share consideration less the applicable exercise or base price is greater than zero dollars ($0), and to the extent that the per-share consideration is less than or equal to the applicable exercise or base price, such Awards shall be canceled for no consideration;

(4)The cancellation of any or all Options, Stock Appreciation Rights and other Awards subject to exercise not assumed or substituted in connection with such Corporate Event (whether vested or unvested) as of the consummation of such Corporate Event; provided that all Options, Stock Appreciation Rights and other Awards to be so canceled pursuant to this paragraph (4) shall first become exercisable for a period of at least ten (10) days prior to such Corporate Event, with any exercise during such period of any unvested Options, Stock Appreciation Rights or other Awards to be (A) contingent

upon and subject to the occurrence of the Corporate Event, and (B) effectuated by such means as are approved by the Committee; and

(5)The replacement of any or all Awards (other than Awards that are intended to qualify as “stock rights” that do not provide for a “deferral of compensation” within the meaning of Section 409A of the Code) with a cash incentive program that preserves the value of the Awards so replaced (determined as of the consummation of the Corporate Event), with subsequent payment of cash incentives subject to the same vesting conditions as applicable to the Awards so replaced and payment to be made within thirty (30) days of the applicable vesting date.

Payments to holders pursuant to paragraph (3) above shall be made in cash or, in the sole discretion of the Committee, and to the extent applicable, in the form of such other consideration necessary for a Participant to receive property, cash, or securities (or a combination thereof) as such Participant would have been entitled to receive upon the occurrence of the transaction if the Participant had been, immediately prior to such transaction, the holder of the number of shares of Stock covered by the Award at such time (less any applicable exercise or base price). In addition, in connection with any Corporate Event, prior to any payment or adjustment contemplated under this Section 10(b), the Committee may require a Participant to (A) represent and warrant as to the unencumbered title to his or her Awards, (B) bear such Participant’s pro-rata share of any post-closing indemnity obligations, and be subject to the same post-closing purchase price adjustments, escrow terms, offset rights, holdback terms, and similar conditions as the other holders of Stock, and (C) deliver customary transfer documentation as reasonably determined by the Committee. The Committee need not take the same action or actions with respect to all Awards or portions thereof or with respect to all Participants. The Committee may take different actions with respect to the vested and unvested portions of an Award.

(c)Fractional Shares.  Any adjustment provided under this Section 10 may, in the Committee’s discretion, provide for the elimination of any fractional share that might otherwise become subject to an Award.  No cash settlements shall be made with respect to fractional shares so eliminated.

(d)Double-Trigger Vesting.  Notwithstanding any other provisions of the Plan, an Award Agreement or Participant Agreement to the contrary, with respect to any Award that is assumed or substituted in connection with a Change in Control, the vesting, payment, purchase or distribution of such Award may not be accelerated by reason of the Change in Control for any Participant unless the Participant experiences an involuntary Termination as a result of the Change in Control.  Unless otherwise provided for in an Award Agreement or Participant Agreement, any Award held by a Participant who experiences an involuntary Termination as a result of a Change in Control shall immediately vest as of the date of such Termination.  For purposes of this Section 10(d), a Participant will be deemed to experience an involuntary Termination as a result of a Change in Control if the Participant experiences a Termination by the Service Recipient other than for Cause, or otherwise experiences a Termination under circumstances which entitle the Participant to mandatory severance payment(s) pursuant to applicable law or, in the case of a non-employee director of the Company, if the non-employee director’s service on the Board terminates in connection with or as a result of a Change in Control, in each case, at any time beginning on the date of the Change in Control up to and including the second (2^nd) anniversary of the Change in Control.

11.Use of Proceeds.

The proceeds received from the sale of Stock pursuant to the Plan shall be used for general corporate purposes.

12.Rights and Privileges as a Stockholder.

Except as otherwise specifically provided in the Plan, no Person shall be entitled to the rights and privileges of Stock ownership in respect of shares of Stock that are subject to Awards hereunder until such shares have been issued to that Person.

13.Transferability of Awards.

Awards may not be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, other than by will or by the applicable laws of descent and distribution, and to the extent subject to exercise, Awards may not be exercised during the lifetime of the grantee other than by the grantee. Notwithstanding the foregoing, except with respect to Incentive Stock Options, Awards and a Participant’s rights under the Plan shall be transferable for no value to the extent provided in an Award Agreement or otherwise determined at any time by the Committee.

14.Employment or Service Rights.

No individual shall have any claim or right to be granted an Award under the Plan or, having been selected for the grant of an Award, to be selected for the grant of any other Award. Neither the Plan nor any action taken hereunder shall be construed as giving any individual any right to be retained in the employ or service of the Company or an Affiliate of the Company.

15.Compliance with Laws.

The obligation of the Company to deliver Stock upon issuance, vesting, exercise, or settlement of any Award shall be subject to all applicable laws, rules, and regulations, and to such approvals by governmental agencies as may be required. Notwithstanding any terms or conditions of any Award to the contrary, the Company shall be under no obligation to offer to sell or to sell, and shall be prohibited from offering to sell or selling, any shares of Stock pursuant to an Award unless such shares have been properly registered for sale with the U.S. Securities and Exchange Commission pursuant to the Securities Act (or with a similar non-U.S. regulatory agency pursuant to a similar law or regulation) or unless the Company has received an opinion of counsel, satisfactory to the Company, that such shares may be offered or sold without such registration pursuant to an available exemption therefrom and the terms and conditions of such exemption have been fully complied with. The Company shall be under no obligation to register for sale or resale under the Securities Act any of the shares of Stock to be offered or sold under the Plan or any shares of Stock to be issued upon exercise or settlement of Awards. If the shares of Stock offered for sale or sold under the Plan are offered or sold pursuant to an exemption from registration under the Securities Act, the Company may restrict the transfer of such shares and may legend the Stock certificates representing such shares in such manner as it deems advisable to ensure the availability of any such exemption.

16.Withholding Obligations.

As a condition to the issuance, vesting, exercise, or settlement of any Award (or upon the making of an election under Section 83(b) of the Code), the Committee may require that a Participant satisfy, through deduction or withholding from any payment of any kind otherwise due to the Participant, or through such other arrangements as are satisfactory to the Committee, the amount of all federal, state, and local income and other taxes of any kind required or permitted to be withheld in connection with such issuance, vesting, exercise, or settlement (or election). The Committee, in its discretion, may permit shares of Stock to be used to satisfy tax withholding requirements, and such shares shall be valued at their Fair Market Value as of the issuance, vesting, exercise, or settlement date of the Award, as applicable. Depending on the withholding method, the Company may withhold by considering the applicable minimum statutorily required withholding rates or other applicable withholding rates in the applicable Participant’s jurisdiction, including maximum applicable rates that may be utilized without creating adverse accounting treatment under Financial Accounting Standards Board Accounting Standards Codification Topic 718 (or any successor pronouncement thereto).

17.Amendment of the Plan or Awards.

(a)Amendment of Plan.  The Board or the Committee may amend the Plan at any time and from time to time.

(b)Amendment of Awards.  The Board or the Committee may amend the terms of any one or more Awards at any time and from time to time.

(c)Stockholder Approval; No Material Impairment.  Notwithstanding anything herein to the contrary, no amendment to the Plan or any Award shall be effective without stockholder approval to the extent that such approval is required pursuant to applicable law or the applicable rules of each national securities exchange on which the Stock is listed.  Additionally, no amendment to the Plan or any Award shall materially impair a Participant’s rights under any Award unless the Participant consents in writing (it being understood that no action taken by the Board or the Committee that is expressly permitted under the Plan, including, without limitation, any actions described in Section 10 hereof, shall constitute an amendment to the Plan or an Award for such purpose).  Notwithstanding the foregoing, subject to the limitations of applicable law, if any, and without an affected Participant’s consent, the Board or the Committee may amend the terms of the Plan or any one or more Awards from time to time as necessary to bring such Awards into compliance with applicable law, including, without limitation, Section 409A of the Code.

(d)No Repricing of Awards Without Stockholder Approval.  Notwithstanding Sections 17(a) or 17(b) above, or any other provision of the Plan, the repricing of Awards shall not be permitted without stockholder approval.  For this purpose, a “repricing” means any of the following (or any other action that has the same effect as any of the following): (1) changing the terms of an Award to lower its exercise or base price (other than on account of capital adjustments resulting from share splits, etc., as described in Section 10(a) hereof), (2) any other action that is treated as a repricing under GAAP, and (3) repurchasing for cash or canceling an Award in exchange for another Award at a time when its exercise or base price is greater than the Fair Market Value of the underlying Stock, unless the cancellation and exchange occurs in connection with an event set forth in Section 10(b) hereof.

18.Termination or Suspension of the Plan.

The Board or the Committee may suspend or terminate the Plan at any time. Unless sooner terminated, the Plan shall terminate on the day before the tenth (10^th) anniversary of the date the stockholders of the Company approve the Plan. No Awards may be granted under the Plan while the Plan is suspended or after it is terminated; provided, however, that following any suspension or termination of the Plan, the Plan shall remain in effect for the purpose of governing all Awards then outstanding hereunder until such time as all Awards under the Plan have been terminated, forfeited, or otherwise canceled, or earned, exercised, settled, or otherwise paid out, in accordance with their terms.

19.Effective Date of the Plan.

The Plan is effective as of the Effective Date, subject to stockholder approval.

20.Miscellaneous.

(a)Certificates.  Stock acquired pursuant to Awards granted under the Plan may be evidenced in such a manner as the Committee shall determine.  If certificates representing Stock are registered in the name of the Participant, the Committee may require that (1) such certificates bear an appropriate legend referring to the terms, conditions, and restrictions applicable to such Stock, (2) the Company retain physical possession of the certificates, and (3) the Participant deliver a stock power to the Company, endorsed in blank, relating to the Stock.  Notwithstanding the foregoing, the Committee may determine, in its sole discretion, that the Stock shall be held in book-entry form rather than delivered to the Participant pending the release of any applicable restrictions.

(b)Other Benefits.  No Award granted or paid out under the Plan shall be deemed compensation for purposes of computing benefits under any retirement plan of the Company or its Affiliates nor affect any benefits under any other benefit plan now or subsequently in effect under which the availability or amount of benefits is related to the level of compensation.

(c)Corporate Action Constituting Grant of Awards.  Corporate action constituting a grant by the Company of an Award to any Participant will be deemed completed as of the date of such corporate action, unless otherwise determined by the Committee, regardless of when the instrument, certificate, or letter evidencing the Award is communicated to, or actually received or accepted by, the Participant.  In the event that the corporate records (e.g., Committee consents, resolutions or minutes) documenting the corporate action constituting the grant contain terms (e.g., exercise price, vesting schedule or number of shares of Stock) that are inconsistent with those in the Award Agreement as a result of a clerical error in connection with the preparation of the Award Agreement, the corporate records will control and the Participant will have no legally binding right to the incorrect term in the Award Agreement.

(d)Clawback/Recoupment Policy.  Notwithstanding anything contained herein to the contrary, all Awards granted under the Plan shall be and remain subject to any incentive compensation clawback or recoupment policy currently in effect or as may be adopted by the Board (or a committee or subcommittee of the Board) and, in each case, as may be amended from time to time.  No such policy adoption or amendment shall in any event require the prior consent of any Participant.  No recovery of compensation under such a clawback policy will be an event

giving rise to a right to resign for “good reason” or “constructive termination” (or similar term) under any agreement with the Company or any of its Affiliates.  In the event that an Award is subject to more than one such policy, the policy with the most restrictive clawback or recoupment provisions shall govern such Award, subject to applicable law.

(e)Non-Exempt Employees.  If an Option is granted to an employee of the Company or any of its Affiliates in the United States who is a non-exempt employee for purposes of the Fair Labor Standards Act of 1938, as amended, the Option will not be first exercisable for any shares of Stock until at least six (6) months following the date of grant of the Option (although the Option may vest prior to such date).  Consistent with the provisions of the Worker Economic Opportunity Act, (1) if such employee dies or suffers a Disability, (2) upon a Corporate Event in which such Option is not assumed, continued, or substituted, (3) upon a Change in Control, or (4) upon the Participant’s retirement (as such term may be defined in the applicable Award Agreement or a Participant Agreement, or, if no such definition exists, in accordance with the Company’s then current employment policies and guidelines), the vested portion of any Options held by such employee may be exercised earlier than six (6) months following the date of grant.  The foregoing provision is intended to operate so that any income derived by a non-exempt employee in connection with the exercise or vesting of an Option will be exempt from his or her regular rate of pay.  To the extent permitted and/or required for compliance with the Worker Economic Opportunity Act to ensure that any income derived by a non-exempt employee in connection with the exercise, vesting or issuance of any shares under any other Award will be exempt from such employee’s regular rate of pay, the provisions of this Section 20(e)will apply to all Awards.

(f)Data Privacy.  As a condition of receipt of any Award, each Participant explicitly and unambiguously consents to the collection, use, and transfer, in electronic or other form, of personal data as described in this Section 20(e) by and among, as applicable, the Company and its Affiliates for the exclusive purpose of implementing, administering, and managing the Plan and Awards and the Participant’s participation in the Plan.  In furtherance of such implementation, administration, and management, the Company and its Affiliates may hold certain personal information about a Participant, including, but not limited to, the Participant’s name, home address, telephone number, date of birth, social security or insurance number or other identification number, salary, nationality, job title(s), information regarding any securities of the Company or any of its Affiliates, and details of all Awards (the “Data”).  In addition to transferring the Data amongst themselves as necessary for the purpose of implementation, administration, and management of the Plan and Awards and the Participant’s participation in the Plan, the Company and its Affiliates may each transfer the Data to any third parties assisting the Company in the implementation, administration, and management of the Plan and Awards and the Participant’s participation in the Plan.  Recipients of the Data may be located in the Participant’s country or elsewhere, and the Participant’s country and any given recipient’s country may have different data privacy laws and protections.  By accepting an Award, each Participant authorizes such recipients to receive, possess, use, retain, and transfer the Data, in electronic or other form, for the purposes of assisting the Company in the implementation, administration, and management of the Plan and Awards and the Participant’s participation in the Plan, including any requisite transfer of such Data as may be required to a broker or other third party with whom the Company or the Participant may elect to deposit any shares of Stock.  The Data related to a Participant will be held only as long as is necessary to implement, administer, and manage the Plan and Awards and the Participant’s

participation in the Plan.  A Participant may, at any time, view the Data held by the Company with respect to such Participant, request additional information about the storage and processing of the Data with respect to such Participant, recommend any necessary corrections to the Data with respect to the Participant, or refuse or withdraw the consents herein in writing, in any case without cost, by contacting his or her local human resources representative.  The Company may cancel the Participant’s eligibility to participate in the Plan, and in the Committee’s discretion, the Participant may forfeit any outstanding Awards if the Participant refuses or withdraws the consents described herein.  For more information on the consequences of refusal to consent or withdrawal of consent, Participants may contact their local human resources representative.

(g)Participants Outside of the United States.  The Committee may modify the terms of any Award under the Plan made to or held by a Participant who is then a resident, or is primarily employed or providing services, outside of the United States in any manner deemed by the Committee to be necessary or appropriate in order that such Award shall conform to laws, regulations, and customs of the country in which the Participant is then a resident or primarily employed or providing services, or so that the value and other benefits of the Award to the Participant, as affected by non–U.S. tax laws and other restrictions applicable as a result of the Participant’s residence, employment, or providing services abroad, shall be comparable to the value of such Award to a Participant who is a resident, or is primarily employed or providing services, in the United States.  An Award may be modified under this Section 20(g) in a manner that is inconsistent with the express terms of the Plan, so long as such modifications will not contravene any applicable law or regulation or result in actual liability under Section 16(b) of the Exchange Act for the Participant whose Award is modified.  Additionally, the Committee may adopt such procedures and sub-plans as are necessary or appropriate to permit participation in the Plan by Eligible Persons who are non–U.S. nationals or are primarily employed or providing services outside the United States.

(h)Change in Time Commitment.  In the event a Participant’s regular level of time commitment in the performance of his or her services for the Company or any of its Affiliates is reduced (for example, and without limitation, if the Participant is an employee of the Company and the employee has a change in status from a full-time employee to a part-time employee) after the date of grant of any Award to the Participant, the Committee has the right in its sole discretion to (i) make a corresponding reduction in the number of shares of Stock subject to any portion of such Award that is scheduled to vest or become payable after the date of such change in time commitment, and (ii) in lieu of or in combination with such a reduction, extend the vesting or payment schedule applicable to such Award.  In the event of any such reduction, the Participant will have no right with respect to any portion of the Award that is so reduced or extended.

(i)No Liability of Committee Members.  Neither any member of the Committee nor any of the Committee’s permitted delegates shall be liable personally by reason of any contract or other instrument executed by such member or on his or her behalf in his or her capacity as a member of the Committee or for any mistake of judgment made in good faith, and the Company shall indemnify and hold harmless each member of the Committee and each other employee, officer, or director of the Company to whom any duty or power relating to the administration or interpretation of the Plan may be allocated or delegated, against all costs and expenses (including counsel fees) and liabilities (including sums paid in settlement of a claim) arising out of any act or omission to act in connection with the Plan, unless arising out of such

Person’s own fraud or willful misconduct; provided, however, that approval of the Board shall be required for the payment of any amount in settlement of a claim against any such Person.  The foregoing right of indemnification shall not be exclusive of any other rights of indemnification to which such Persons may be entitled under the Company’s certificate or articles of incorporation or by-laws, each as may be amended from time to time, as a matter of law, or otherwise, or any power that the Company may have to indemnify them or hold them harmless.

(j)Payments Following Accidents or Illness.  If the Committee shall find that any Person to whom any amount is payable under the Plan is unable to care for his or her affairs because of illness or accident, or is a minor, or has died, then any payment due to such Person or his or her estate (unless a prior claim therefor has been made by a duly appointed legal representative) may, if the Committee so directs the Company, be paid to his or her spouse, child, relative, an institution maintaining or having custody of such Person, or any other Person deemed by the Committee to be a proper recipient on behalf of such Person otherwise entitled to payment.  Any such payment shall be a complete discharge of the liability of the Committee and the Company therefor.

(k)Governing Law.  The Plan shall be governed by and construed in accordance with the laws of State of Colorado without reference to the principles of conflicts of laws thereof.

(l)Electronic Delivery.  Any reference herein to a “written” agreement or document or “writing” will include any agreement or document delivered electronically or posted on the Company’s intranet (or other shared electronic medium controlled or authorized by the Company to which the Participant has access) to the extent permitted by applicable law.

(m)Arbitration.  All disputes and claims of any nature that a Participant (or such Participant’s transferee or estate) may have against the Company arising out of or in any way related to the Plan or any Award Agreement shall be submitted to and resolved exclusively by binding arbitration conducted in Boulder, Colorado (or such other location as the parties thereto may agree) in accordance with the applicable rules of the American Arbitration Association then in effect, and the arbitration shall be heard and determined by a panel of three arbitrators in accordance with such rules (except that in the event of any inconsistency between such rules and this Section 20(m), the provisions of this Section 20(m) shall control).  The arbitration panel may not modify the arbitration rules specified above without the prior written approval of all parties to the arbitration.  Within ten business days after the receipt of a written demand, each party shall designate one arbitrator, each of whom shall have experience involving complex business or legal matters, but shall not have any prior, existing or potential material business relationship with any party to the arbitration.  The two arbitrators so designated shall select a third arbitrator, who shall preside over the arbitration, shall be similarly qualified as the two arbitrators and shall have no prior, existing or potential material business relationship with any party to the arbitration; provided that if the two arbitrators are unable to agree upon the selection of such third arbitrator, such third arbitrator shall be designated in accordance with the arbitration rules referred to above.  The arbitrators will decide the dispute by majority decision, and the decision shall be rendered in writing and shall bear the signatures of the arbitrators and the party or parties who shall be charged therewith, or the allocation of the expenses among the parties in the discretion of the panel.  The arbitration decision shall be rendered as soon as possible, but in any event not later than 120 days

after the constitution of the arbitration panel.  The arbitration decision shall be final and binding upon all parties to the arbitration.  The parties hereto agree that judgment upon any award rendered by the arbitration panel may be entered in the United States District Court for the District of Colorado or any court sitting in Boulder, Colorado.  To the maximum extent permitted by law, the parties hereby irrevocably waive any right of appeal from any judgment rendered upon any such arbitration award in any such court.  Notwithstanding the foregoing, any party may seek injunctive relief in any such court.

(n)Statute of Limitations.  A Participant or any other person filing a claim for benefits under the Plan must file the claim within one (1) year of the date the Participant or other person knew or should have known of the facts giving rise to the claim.  This one-year statute of limitations will apply in any forum where a Participant or any other person may file a claim and, unless the Company waives the time limits set forth above in its sole discretion, any claim not brought within the time periods specified shall be waived and forever barred.

(o)Funding.  No provision of the Plan shall require the Company, for the purpose of satisfying any obligations under the Plan, to purchase assets or place any assets in a trust or other entity to which contributions are made or otherwise to segregate any assets, nor shall the Company be required to maintain separate bank accounts, books, records, or other evidence of the existence of a segregated or separately maintained or administered fund for such purposes.  Participants shall have no rights under the Plan other than as unsecured general creditors of the Company, except that insofar as they may have become entitled to payment of additional compensation by performance of services, they shall have the same rights as other employees and service providers under general law.

(p)Reliance on Reports.  Each member of the Committee and each member of the Board shall be fully justified in relying, acting, or failing to act, and shall not be liable for having so relied, acted, or failed to act in good faith, upon any report made by the independent public accountant of the Company and its Affiliates and upon any other information furnished in connection with the Plan by any Person or Persons other than such member.

(q)Titles and Headings.  The titles and headings of the sections in the Plan are for convenience of reference only, and in the event of any conflict, the text of the Plan, rather than such titles or headings, shall control.

***

Adopted by the Board of Directors: April 22, 2020
Approved by the Stockholders:June 4, 2020Termination Date: June 3, 2030

EX-31.1

Exhibit 31.1

I, Patrick J. Mahaffy, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Clovis Oncology, Inc. for the quarter ended June 30, 2020;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 6, 2020

/s/ PATRICK J. MAHAFFY

Patrick J. Mahaffy

President and Chief Executive Officer

EX-31.2

Exhibit 31.2

I, Daniel W. Muehl, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Clovis Oncology, Inc. for the quarter ended June 30, 2020;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 6, 2020

/s/ DANIEL W. MUEHL

Daniel W. Muehl

Executive Vice President and Chief Finance Officer

EX-32.1

Exhibit 32.1

CERTIFICATIONS PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

(18 U.S.C. SECTION 1350)

In connection with the Quarterly Report of Clovis Oncology, Inc., a Delaware corporation (the “Company”), on Form 10-Q for the quarter ended June 30, 2020, as filed with the Securities and Exchange Commission (the “Report”), Patrick J. Mahaffy, as Chief Executive Officer of the Company, does hereby certify, pursuant to §906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. §1350), that to his knowledge:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: August 6, 2020

/s/ PATRICK J. MAHAFFY

Patrick J. Mahaffy

President and Chief Executive Officer

EX-32.2

Exhibit 32.2

CERTIFICATIONS PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

(18 U.S.C. SECTION 1350)

In connection with the Quarterly Report of Clovis Oncology, Inc., a Delaware corporation (the “Company”), on Form 10-Q for the quarter ended June 30, 2020, as filed with the Securities and Exchange Commission (the “Report”), Daniel W. Muehl, as Senior Vice President of Finance and Principal Financial and Accounting Officer of the Company, does hereby certify, pursuant to §906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. §1350), that to his knowledge:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: August 6, 2020

/s/ DANIEL W. MUEHL

Daniel W. Muehl

Executive Vice President and Chief Finance Officer

XML

Document and Entity Information - shares	6 Months Ended
	Jun. 30, 2020	Jul. 31, 2020
Cover [Abstract]
Document Type	10-Q
Document Quarterly Report	true
Document Transition Report	false
Document Period End Date	Jun. 30, 2020
Entity File Number	001-35347
Entity Registrant Name	Clovis Oncology, Inc.
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	90-0475355
Entity Address, Address Line One	5500 Flatiron Parkway, Suite 100
Entity Address, City or Town	Boulder
Entity Address, State or Province	CO
Entity Address, Postal Zip Code	80301
City Area Code	303
Local Phone Number	625-5000
Title of 12(b) Security	Common Stock
Trading Symbol	CLVS
Security Exchange Name	NASDAQ
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Large Accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		88,203,011
Current Fiscal Year End Date	--12-31
Document Fiscal Year Focus	2020
Document Fiscal Period Focus	Q2
Entity Central Index Key	0001466301
Amendment Flag	false

XML

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
Revenues:
Product revenue	$ 39,887	$ 32,978	$ 82,451	$ 66,096
Product revenue - extensible list	us-gaap:ProductMember	us-gaap:ProductMember	us-gaap:ProductMember	us-gaap:ProductMember
Operating expenses:
Research and development	$ 69,878	$ 70,746	$ 138,099	$ 132,777
Selling, general and administrative	41,902	48,029	84,500	95,791
Other operating expenses	355		3,805
Total expenses	122,535	126,437	247,112	244,756
Operating loss	(82,648)	(93,459)	(164,661)	(178,660)
Other income (expense):
Interest expense	(6,739)	(3,817)	(16,300)	(7,407)
Foreign currency gain (loss)	142	(226)	(735)	(419)
Loss on convertible senior notes conversion			(7,791)
Loss on extinguishment of debt	(3,277)		(3,277)
Legal settlement loss		(25,000)		(25,000)
Other income	239	1,899	1,081	4,300
Other income (expense), net	(9,635)	(27,144)	(27,022)	(28,526)
Loss before income taxes	(92,283)	(120,603)	(191,683)	(207,186)
Income tax benefit	36	176	104	336
Net loss	(92,247)	(120,427)	(191,579)	(206,850)
Other comprehensive income (loss):
Foreign currency translation adjustments, net of tax	61	(1)	(42)	(6)
Net unrealized gain on available-for-sale securities, net of tax	(84)	77	(6)	152
Other comprehensive (loss) income:	(23)	76	(48)	146
Comprehensive loss	$ (92,270)	$ (120,351)	$ (191,627)	$ (206,704)
Loss per basic and diluted common share:
Basic and diluted net loss per common share	$ (1.15)	$ (2.27)	$ (2.52)	$ (3.91)
Basic and diluted weighted average common shares outstanding	80,453	53,028	76,057	52,960
Product
Operating expenses:
Cost of sales	$ 9,120	$ 6,445	$ 18,216	$ 13,851
Intangible assets amortization
Operating expenses:
Cost of sales	$ 1,280	$ 1,217	$ 2,492	$ 2,337

XML

CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Jun. 30, 2020	Dec. 31, 2019
Current assets:
Cash and cash equivalents	$ 261,436	$ 161,833
Accounts receivable, net	18,204	20,562
Inventories, net	26,851	26,519
Available-for-sale securities		134,826
Prepaid research and development expenses	1,832	3,881
Other current assets	14,515	18,847
Total current assets	322,838	366,468
Inventories	106,337	98,053
Deposit on inventory		12,350
Property and equipment, net	13,412	15,287
Right-of-use assets, net	32,363	28,141
Intangible assets, net	68,428	62,920
Goodwill	63,074	63,074
Other assets	21,757	23,311
Total assets	628,209	669,604
Current liabilities:
Accounts payable	24,287	32,237
Accrued research and development expenses	45,587	53,214
Lease liabilities	5,028	5,405
Other accrued expenses	37,682	42,228
Total current liabilities	112,584	133,084
Long-term lease liabilities - less current portion	33,786	29,479
Convertible senior notes	504,680	644,751
Borrowings under financing agreement	72,459	34,991
Other long-term liabilities	2,075	1,556
Total liabilities	725,584	843,861
Commitments and contingencies (Note 15)
Stockholders' equity:
Preferred stock, par value $0.001 per share; 10,000,000 shares authorized, no shares issued and outstanding at June 30, 2020 and December 31, 2019
Common stock, $0.001 par value per share, 200,000,000 shares authorized at June 30, 2020 and December 31, 2019, respectively; 88,196,705 and 54,956,341 shares issued and outstanding at June 30, 2020 and December 31, 2019, respectively	88	55
Additional paid-in capital	2,382,544	2,114,068
Accumulated other comprehensive loss	(44,913)	(44,865)
Accumulated deficit	(2,435,094)	(2,243,515)
Total stockholders' deficit	(97,375)	(174,257)
Total liabilities and stockholders' equity (deficit)	$ 628,209	$ 669,604

XML

CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares	Jun. 30, 2020	Dec. 31, 2019
CONSOLIDATED BALANCE SHEETS
Preferred stock, par value	$ 0.001	$ 0.001
Preferred stock, shares authorized	10,000,000	10,000,000
Preferred stock, shares issued	0	0
Preferred stock, shares outstanding	0	0
Common stock, par value	$ 0.001	$ 0.001
Common stock, shares authorized	200,000,000	200,000,000
Common stock, shares issued	88,196,705	54,956,341
Common stock, shares outstanding	88,196,705	54,956,341

XML

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT) - USD ($) $ in Thousands	Common Stock	Additional Paid-In Capital	Accumulated Other Comprehensive Income (Loss)	Accumulated Deficit	Total
Beginning Balance at Dec. 31, 2018	$ 53	$ 2,034,142	$ (44,634)	$ (1,843,092)	$ 146,469
Beginning Balance (in shares) at Dec. 31, 2018	52,797,516
Exercise of stock options		1,093			1,093
Exercise of stock options (in shares)	83,132
Issuance of common stock from vesting of restricted stock units (in shares)	113,402
Share-based compensation expense		13,639			13,639
Net unrealized gain (loss) on available-for-sale securities			75		75
Foreign currency translation adjustments			(5)		(5)
Net loss				(86,421)	(86,421)
Ending Balance at Mar. 31, 2019	$ 53	2,048,874	(44,564)	(1,929,513)	74,850
Ending Balance (in shares) at Mar. 31, 2019	52,994,050
Beginning Balance at Dec. 31, 2018	$ 53	2,034,142	(44,634)	(1,843,092)	146,469
Beginning Balance (in shares) at Dec. 31, 2018	52,797,516
Net unrealized gain (loss) on available-for-sale securities					152
Foreign currency translation adjustments					(6)
Net loss					(206,850)
Ending Balance at Jun. 30, 2019	$ 53	2,064,393	(44,488)	(2,049,940)	(29,982)
Ending Balance (in shares) at Jun. 30, 2019	53,170,479
Beginning Balance at Mar. 31, 2019	$ 53	2,048,874	(44,564)	(1,929,513)	74,850
Beginning Balance (in shares) at Mar. 31, 2019	52,994,050
Exercise of stock options		223			223
Exercise of stock options (in shares)	20,741
Issuance of common stock from vesting of restricted stock units (in shares)	63,413
Issuance of common stock under employee stock purchase plan		1,166			1,166
Issuance of common stock under employee stock purchase plan (in shares)	92,275
Share-based compensation expense		14,130			14,130
Net unrealized gain (loss) on available-for-sale securities			77		77
Foreign currency translation adjustments			(1)		(1)
Net loss				(120,427)	(120,427)
Ending Balance at Jun. 30, 2019	$ 53	2,064,393	(44,488)	(2,049,940)	(29,982)
Ending Balance (in shares) at Jun. 30, 2019	53,170,479
Beginning Balance at Dec. 31, 2019	$ 55	2,114,068	(44,865)	(2,243,515)	$ (174,257)
Beginning Balance (in shares) at Dec. 31, 2019	54,956,341				54,956,341
Exercise of stock options		2			$ 2
Exercise of stock options (in shares)	759
Issuance of common stock from vesting of restricted stock units (in shares)	662,323
Share-based compensation expense		12,961			12,961
Net unrealized gain (loss) on available-for-sale securities			78		78
Foreign currency translation adjustments			(103)		(103)
Convertible senior notes conversion	$ 18	133,640			133,658
Convertible senior notes conversion (in shares)	17,877,164
Net loss				(99,332)	(99,332)
Ending Balance at Mar. 31, 2020	$ 73	2,260,671	(44,890)	(2,342,847)	(126,993)
Ending Balance (in shares) at Mar. 31, 2020	73,496,587
Beginning Balance at Dec. 31, 2019	$ 55	2,114,068	(44,865)	(2,243,515)	$ (174,257)
Beginning Balance (in shares) at Dec. 31, 2019	54,956,341				54,956,341
Exercise of stock options (in shares)					24,153
Net unrealized gain (loss) on available-for-sale securities					$ (6)
Foreign currency translation adjustments					(42)
Net loss					(191,579)
Ending Balance at Jun. 30, 2020	$ 88	2,382,544	(44,913)	(2,435,094)	$ (97,375)
Ending Balance (in shares) at Jun. 30, 2020	88,196,705				88,196,705
Beginning Balance at Mar. 31, 2020	$ 73	2,260,671	(44,890)	(2,342,847)	$ (126,993)
Beginning Balance (in shares) at Mar. 31, 2020	73,496,587
Exercise of stock options		(41)			(41)
Exercise of stock options (in shares)	6,661
Issuance of common stock from vesting of restricted stock units (in shares)	113,461
Issuance of common stock under employee stock purchase plan		907			907
Issuance of common stock under employee stock purchase plan (in shares)	158,126
Share-based compensation expense		13,313			13,313
Net unrealized gain (loss) on available-for-sale securities			(84)		(84)
Foreign currency translation adjustments			61		61
Convertible senior notes conversion	$ 4	24,278			24,282
Convertible senior notes conversion (in shares)	3,331,870
Net loss				(92,247)	(92,247)
Ending Balance at Jun. 30, 2020	$ 88	2,382,544	$ (44,913)	$ (2,435,094)	$ (97,375)
Ending Balance (in shares) at Jun. 30, 2020	88,196,705				88,196,705
Issuance of common stock, net of issuance costs	$ 11	$ 83,416			$ 83,427
Issuance of common stock, net of issuance costs (in shares)	11,090,000

XML

CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019
Operating activities
Net loss	$ (191,579)	$ (206,850)
Adjustments to reconcile net loss to net cash used in operating activities:
Share-based compensation expense	26,274	27,769
Depreciation and amortization	4,128	3,632
Amortization of premiums and discounts on available-for-sale securities	(174)	(884)
Amortization of debt issuance costs	1,423	1,324
Write-off of debt issuance costs related to convertible senior notes transactions	4,344
Loss on convertible senior notes conversion	7,791
Loss on extinguishment of debt	3,277
Legal settlement loss		21,000
Changes in operating assets and liabilities:
Accounts receivable	2,359	(2,491)
Inventory	4,357	(35,351)
Prepaid and accrued research and development expenses	(5,328)	5,041
Other operating assets and liabilities	5,895	(5,587)
Accounts payable	(7,804)	(1,393)
Other accrued expenses	2,686	(2,698)
Net cash used in operating activities	(142,351)	(196,488)
Investing activities
Purchases of property and equipment	(75)	(1,484)
Purchases of available-for-sale securities	(9,962)	(205,779)
Sales of available-for-sale securities	144,644	296,845
Acquired in-process research and development - milestone payment	(8,000)	(15,750)
Net cash provided by investing activities	126,607	73,832
Financing activities
Proceeds from the sale of common stock, net of issuance costs	246,727
Payment of convertible senior notes	(164,443)
Proceeds from borrowings under financing agreement	33,322	6,862
Proceeds from the exercise of stock options and employee stock purchases	868	2,482
Payments on finance leases	(720)	(505)
Payments on other long-term liabilities	(103)
Net cash provided by financing activities	115,651	9,344
Effect of exchange rate changes on cash and cash equivalents	(304)	43
Increase (decrease) in cash and cash equivalents	99,603	(113,269)
Cash and cash equivalents at beginning of period	161,833	221,876
Cash and cash equivalents at end of period	261,436	108,607
Supplemental disclosure of cash flow information:
Cash paid for interest	6,006	5,469
Non-cash investing and financing activities:
Vesting of restricted stock units	$ 6,255	$ 4,283

XML

Nature of Business and Basis of Presentation

6 Months Ended

Jun. 30, 2020

Nature of Business and Basis of Presentation

Nature of Business and Basis of Presentation

1. Nature of Business and Basis of Presentation

Clovis Oncology, Inc. (together with its consolidated subsidiaries, the “Company”, “Clovis”, “we”, “our”, “us”) is a biopharmaceutical company focused on acquiring, developing and commercializing innovative anti-cancer agents in the 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. We have and intend to continue to license or acquire rights to oncology compounds in all stages of development. In exchange for the right to develop and commercialize these compounds, we generally expect to provide the licensor with a combination of upfront payments, milestone payments and royalties on future sales. In addition, we generally expect to assume the responsibility for future drug development and commercialization costs. We currently operate in one segment. Since inception, our operations have consisted primarily of developing in-licensed compounds, evaluating new product acquisition candidates and general corporate activities and since 2016 we have also marketed and sold products.

Our marketed product Rubraca® (rucaparib), an oral small molecule inhibitor of poly ADP-ribose polymerase (“PARP”), is marketed in the 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 United States Food and Drug Administration (“FDA”) in December 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 and selected for therapy based on an FDA-approved companion diagnostic for Rubraca. In April 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.

In May 2018, the European Commission granted a conditional marketing authorization 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. In January 2019, the European 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 in the EU for certain patients in the recurrent ovarian cancer maintenance setting regardless of their BRCA mutation status. Following successful reimbursement negotiations, we have launched Rubraca in each of Germany, United Kingdom, Italy, France and Spain.

In May 2020, the FDA approved Rubraca tablets for the treatment of adult patients with a deleterious BRCA mutation (germline and/or somatic)-associated mCRPC who have been treated with androgen receptor-directed therapy and a taxane-based chemotherapy. The FDA approved this indication under accelerated approval based on objective response rate and duration of response data from the multi-center, single arm TRITON2 clinical trial. We have launched Rubraca for prostate cancer in the U.S. 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 the Rubraca accelerated approval in mCRPC.

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 (“BMS”) to evaluate its immunotherapy OPDIVO® (nivolumab) in combination with Rubraca. We initiated the Phase 2 LODESTAR study in December 2019 to evaluate Rubraca in homologous recombination repair genes across tumor types. The study is evaluating rucaparib as monotherapy treatment in patients with recurrent solid tumors associated with a deleterious mutation in homologous recombination repair genes. Based on our interactions with the FDA, we believe that this study may be registration-

enabling for a targeted gene- and tumor-agnostic label, if data from the trial support the potential for an accelerated approval. We may potentially file a supplemental New Drug Application with the FDA for this indication in 2021. We hold worldwide rights to Rubraca.

In addition to Rubraca, we have a second product candidate currently in clinical development. Lucitanib is an investigational, oral, potent inhibitor of the tyrosine kinase activity of vascular endothelial growth factor receptors 1 through 3 (“VEGFR1-3”), platelet-derived growth factor receptors alpha and beta (“PDGFR α/β”) and fibroblast growth factor receptors 1 through 3 (“FGFR1-3”). We believe that data for a drug similar to lucitanib that inhibits these same pathways – when combined with a PD-1 inhibitor – represent a scientific rationale for development of lucitanib in combination with a PD-1 inhibitor, and in February 2019, lucitanib was added to our clinical collaboration with BMS. Encouraging data of VEGF and PARP inhibitors in combination also supports the evaluation of lucitanib combined with Rubraca. Thus, we are currently enrolling Phase 1b/2 combination studies involving lucitanib consist of the Clovis-sponsored LIO-1 study of lucitanib in combination with nivolumab in advanced solid tumors and gynecologic cancers and an arm of the Clovis-sponsored SEASTAR study evaluating lucitanib in combination with Rubraca in advanced solid tumors and ovarian cancer. We hold the global (excluding China) development and commercialization rights for lucitanib.

Following completion of preclinical work to support an investigational new drug application (“IND”) for the lead candidate under our license and collaboration agreement, designated internally as FAP-2286, we plan to conduct global clinical trials. We anticipate submitting two INDs for FAP-2286 for use as imaging and treatment agents, respectively, in Q4 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. We hold U.S. and global rights to FAP-2286, excluding Europe (defined to include Russia, Turkey and Israel), where 3BP retains rights. We also have agreed with 3BP to collaborate on a discovery program directed to up to three additional, undisclosed targets for peptide-targeted radionuclide therapy, to which we would obtain global rights for any resulting product candidates.

In September 2019, we entered into a license and collaboration agreement with 3B Pharmaceuticals GmbH (“3BP”) to develop a peptide-targeted radionuclide therapy (“PTRT”) and imaging agent targeting fibroblast-activating protein alpha (“FAP”).

Basis of Presentation

All financial information presented includes the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.

The unaudited financial statements of Clovis Oncology, Inc. included herein reflect all adjustments that, in the opinion of management, are necessary to fairly state our financial position, results of operations and cash flows for the periods presented herein. Interim results may not be indicative of the results that may be expected for the full year. Certain information and footnote disclosures normally included in audited financial statements prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) have been condensed or omitted pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”). These financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto which are included in our Annual Report on Form 10-K for the year ended December 31, 2019 (“2019 Form 10-K”) for a broader discussion of our business and the opportunities and risks inherent in such business.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, expenses and revenue and related disclosures. On an ongoing basis, we evaluate our estimates, including estimates related to revenue deductions, intangible asset impairment, clinical trial accruals and share-based compensation expense. We base our estimates on historical experience and other market-specific or other relevant assumptions that we believe to be reasonable under the circumstances. Actual results may differ from those estimates or assumptions.

Liquidity

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. 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.

Based on current estimates, we believe that our existing cash, cash equivalents and available-for-sale securities will allow us to fund our operating plan through at least the next 12 months.

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Summary of Significant Accounting Policies

6 Months Ended

Jun. 30, 2020

Summary of Significant Accounting Policies

Summary of Significant Accounting Policies

2. Summary of Significant Accounting Policies

Recently Adopted Accounting Standards

In June 2016, the FASB issued ASU 2016-13, “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments”. The guidance is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted. We adopted ASU 2016-13 as of January 1, 2020. Upon the adoption of ASU 2016-13 on January 1, 2020, we are required to determine whether a decline in the fair value below the amortized cost basis (i.e., impairment) of an available-for-sale debt is security is due to credit-related factors or noncredit-related factors. Any impairment that is not credit related is recognized in accumulated other comprehensive loss, net of applicable taxes. When evaluating an impairment, entities may not use the length of time a security has been in an unrealized loss position as a factor, either by itself or in combination with other factors, to conclude that a credit loss does not exist. We applied this impairment model for available-for-sale debt securities as of January 1, 2020 and no impairment was recognized upon adoption. In addition, no impairment was recognized for the three and six months ended June 30, 2020. We recognized a minimal allowance for credit losses related to our accounts receivable at June 30, 2020. The adoption of ASU 2016-13 did not materially impact our consolidated financial statements and disclosures.

In August 2018, the FASB issued ASU 2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement”. The guidance is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. We adopted ASU 2018-02 as of January 1, 2020 and there was no material impact on our consolidated financial statements and related disclosures.

Revenue Recognition

We are currently approved to sell Rubraca in the United States and Europe markets. 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 health care providers. Separately, we have arrangements with certain payors and other third parties that provide for government-mandated and privately-negotiated rebates, chargebacks and discounts. 

Product Revenue

Revenue from product sales are recognized when the performance obligation is satisfied, which is when customers obtain control of our product at a point in time, typically upon delivery. We expense incremental costs of obtaining a contract as and when incurred if the expected amortization period of the asset that we would have recognized is one year or less.

Reserves for Variable Consideration

Revenues from product sales are recorded at the net sales price (transaction price), which includes estimates of variable consideration for which reserves are established and which result from price concessions that include rebates, chargebacks, discounts, co-pay assistance, estimated product returns and other allowances that are offered within contracts between us and our customers, health care providers, payors and other indirect customers relating to the sales of our product. These reserves are based on the amounts earned or to be claimed on the related sales and are classified as reductions of accounts receivable (if the amount is payable to the customers) or a current liability (if the amount is

payable to a party other than a customer). Where appropriate, these estimates take into consideration a range of possible outcomes which are probability-weighted for relevant factors such as our historical experience, current contractual and statutory requirements, specific known market events and trends, industry data and forecasted customer buying and payment patterns. Overall, these reserves reflect our best estimates of the amount of consideration to which we are entitled based on the terms of the contract. The amount of variable consideration which is included in the transaction price may be constrained and is included in the net sales price only to the extent that it is probable that a significant reversal in the amount of the cumulative revenue recognized will not occur in a future period. Actual amounts of consideration ultimately received may differ from our estimates. If actual results in the future vary from our estimates, we adjust these estimates, which would affect product revenue and earnings in the period such variances become known.

Government Rebates. Rebates include mandated discounts under the Medicaid Drug Rebate Program, the Medicare coverage gap program, the Tricare health program and various European National Health Service, Sick Fund and Clawback programs. Rebates are amounts owed after the final dispensing of products to a benefit plan participant and are based upon contractual agreements or legal requirements with the public-sector benefit providers. These reserves are recorded in the same period the related revenue is recognized, resulting in a reduction of product revenue and the establishment of a current liability which is included in accrued expenses on the Consolidated Balance Sheets. Our rebate estimates are based upon a range of possible outcomes that are probability-weighted for the estimated payor mix. The accrual for rebates is based on the expected utilization from historical data we have accumulated since the Rubraca product launch.

GPO and Payor Rebates. We contract with various private payor organizations and group purchasing organizations (“GPO”), primarily insurance companies, pharmacy benefit managers and hospitals, for the payment of rebates with respect to utilization of our products. We estimate these rebates and record such estimates in the same period the related revenue is recognized, resulting in a reduction of product revenue and the establishment of a current liability.

Chargebacks. Chargebacks are discounts that occur when contracted customers, which currently consist primarily of group purchasing organizations, Public Health Service (“PHS”) organizations and federal government entities purchasing via the Federal Supply Schedule, purchase directly from our specialty distributors at a discounted price. The specialty distributor, in turn, charges back the difference between the price initially paid by the specialty distributor and the discounted price paid to the specialty distributor by the healthcare provider. These reserves are established in the same period that the related revenue is recognized, resulting in a reduction of product revenue and accounts receivable. The accrual for specialty distributor chargebacks is estimated based on known chargeback rates and known sales to specialty distributors adjusted for the estimated utilization by healthcare providers.

Discounts and Fees. Our payment terms are generally 30 days. Specialty distributors and specialty pharmacies are offered various forms of consideration, including service fees and prompt pay discounts for payment within a specified period. We expect these customers will earn prompt pay discounts and therefore, we deduct the full amount of these discounts and service fees from product sales when revenue is recognized.

Co-pay assistance. Patients who have commercial insurance and meet certain eligibility requirements may receive co-pay assistance. The intent of this program is to reduce the patient’s out of pocket costs. Liabilities for co-pay assistance are based on actual program participation provided by third-party administrators at month end.

Returns. Consistent with industry practice, we generally offer customers a right of return limited only to product that will expire in six months or product that is six months beyond the expiration date. To date, we have had minimal product returns and we currently do not have an accrual for product returns. We will continue to assess our estimate for product returns as we gain additional historical experience.

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.

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.

Accounts Receivable

As a result of the adoption of ASU 2016-13, we recognized a minimal allowance for credit losses related to our accounts receivable at June 30, 2020. We provide an allowance for doubtful accounts based on experience and specifically identified risks. Accounts receivable are charged off against the allowance for doubtful accounts when we determine that recovery is unlikely and we cease collection efforts.

Inventory

Inventories are stated at the lower of cost or estimated net realizable value, on a first-in, first-out (“FIFO”) basis. Inventories include active pharmaceutical ingredient (“API”), contract manufacturing costs and overhead allocations. We began capitalizing incurred inventory related costs upon the regulatory approval of Rubraca. Prior to the regulatory approval of Rubraca, we incurred costs for the manufacture of the drug that could potentially be available to support the commercial launch of Rubraca and all such costs were recognized as research and development expense.

We regularly analyze our inventory levels for excess quantities and obsolescence (expiration), taking into account factors such as historical and anticipated future sales compared to quantities on hand and the remaining shelf-life of Rubraca. Rubraca finished goods have a shelf-life of four years from the date of manufacture. We expect to sell the finished goods prior to expiration. The API currently has a shelf-life of four years from the date of manufacture but can be retested at an immaterial cost with no expected reduction in potency, thereby extending its shelf-life as needed. We expect to consume substantially all of the API over a period of approximately six years based on our long-range sales projections of Rubraca.

We write down inventory that has become obsolete, inventory that has a cost basis in excess of its estimated realizable value and/or inventory in excess of expected sales requirements. Expired inventory would be disposed of and the related costs would be written off as cost of product revenue. Inventories that are not expected to be consumed within 12 months following the balance sheet date are classified as long-term inventories. Long-term inventories primarily consist of API.

API is currently produced by Lonza. As the API has undergone significant manufacturing specific to its intended purpose at the point it is purchased by us, we classify the API as work-in-process inventory. In addition, we currently manufacture Rubraca finished goods with a single third-party manufacturer. The disruption or termination of the supply of API or the disruption or termination of the manufacturing of our commercial products could have a material adverse effect on our business, financial position and results of operations. API that is written off due to damage and certain costs related to our dedicated production train at Lonza are included in Other Operating Expenses in the Consolidated Statements of Operations and Comprehensive Loss.

Inventory used in clinical trials is expensed as research and development expense when it has been identified for such use.

Our other significant accounting policies are described in Note 2, Summary of Significant Accounting Policies of the Notes to the Consolidated Financial Statements included in our 2019 Form 10-K.

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Financial Instruments and Fair Value Measurements

6 Months Ended

Jun. 30, 2020

Fair Value Measurements

Financial Instruments and Fair Value Measurements

3. Financial Instruments and Fair Value Measurements

Fair value is defined as the exchange price that would be received to sell an asset or paid to transfer a liability (at exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.

The three levels of inputs that may be used to measure fair value include:

Level 1:	Quoted prices in active markets for identical assets or liabilities. Our Level 1 assets consist of money market investments and U.S. treasury securities. We do not have Level 1 liabilities.
Level 2:	Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities in active markets or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Our Level 2 assets consist of U.S. treasury securities. We do not have Level 2 liabilities.
Level 3:	Unobservable inputs that are supported by little or no market activity. We do not have Level 3 assets or liabilities that are measured at fair value on a recurring basis.

The following table identifies our assets and liabilities that were measured at fair value on a recurring basis (in thousands):

	Balance		Level 1		Level 2		Level 3
June 30, 2020
Assets:
Money market	$	147,902	$	147,902	$	—	$	—
U.S. treasury securities		—		—		—		—
Total assets at fair value	$	147,902	$	147,902	$	—	$	—
December 31, 2019
Assets:
Money market	$	61,882	$	61,882	$	—	$	—
U.S. treasury securities		189,736		54,910		134,826		—
Total assets at fair value	$	251,618	$	116,792	$	134,826	$	—

There were no liabilities that were measured at fair value on a recurring basis as of June 30, 2020. There were no transfers between the Level 1 and Level 2 categories or into or out of the Level 3 category during three and six months ended June 30, 2020.

Financial instruments not recorded at fair value include our convertible senior notes. At June 30, 2020, the carrying amount of the 2021 Notes was $64.0 million, which represents the aggregate principal amount net of remaining debt issuance costs, and the fair value was $58.2 million. At June 30, 2020, the carrying amount of the 2024 Notes was $147.0 million, which represents the aggregate principal amount net of remaining debt issuance costs, and the fair value was $152.8 million. At June 30, 2020, the carrying amount of the 2025 Notes was $293.6 million, which represents the aggregate principal amount net of remaining debt issuance costs, and the fair value was $180.8 million. The fair value was determined using Level 2 inputs based on the indicative pricing published by certain investment banks or trading levels of these notes, which are not listed on any securities exchange or quoted on an inter-dealer automated quotation system. See Note 10, Long-term Debt for discussion of the convertible senior notes. The carrying amounts of accounts payable and accrued expenses approximate their fair value due to their short-term maturities.

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Available-for-Sale Securities

6 Months Ended

Jun. 30, 2020

Available-for-Sale Securities

Available-for-Sale Securities

4. Available-for-Sale Securities

We did not have available-for-sale securities as of June 30, 2020.

As of December 31, 2019, available-for-sale securities consisted of the following (in thousands):

			Gross		Gross		Aggregate
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
U.S. treasury securities	$	134,826	$	—	$	—	$	134,826

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Inventories

6 Months Ended

Jun. 30, 2020

Inventories

Inventories

5. Inventories

The following table presents current and long-term inventories as of June 30, 2020 and December 31, 2019:

	June 30,		December 31,
	2020		2019
Work-in-process	$	103,871	$	104,139
Finished goods, net		29,317		20,433
Total inventories	$	133,188	$	124,572

At June 30, 2020, we had $26.9 million of current inventory and $106.3 million of long-term inventory.

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Other Current Assets

6 Months Ended

Jun. 30, 2020

Other Current Assets

Other Current Assets

6. Other Current Assets

Other current assets were comprised of the following (in thousands):

	June 30,		December 31,
	2020		2019
Prepaid insurance	$	1,913	$	505
Prepaid IT		796		698
Prepaid expenses - other		4,235		3,371
Value-added tax ("VAT") receivable		6,364		11,920
Receivable - other		1,111		2,176
Other		96		177
Total	$	14,515	$	18,847

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Intangible Assets and Goodwill

6 Months Ended

Jun. 30, 2020

Intangible Assets and Goodwill

Intangible Assets and Goodwill

7. Intangible Assets and Goodwill

Intangible assets related to capitalized milestones under license agreements consisted of the following (in thousands):

	June 30,		December 31,
	2020		2019
Intangible asset - milestones	$	79,850	$	71,850
Accumulated amortization		(11,422)		(8,930)
Total intangible asset, net	$	68,428	$	62,920

The increase in our intangible asset – milestones since December 31, 2019 is due to an $8.0 million milestone payment to Pfizer related to the May 2020 FDA approval. See Note 13, License Agreements for further discussion of this approval.

The estimated useful lives of these intangible assets are based on the estimated remaining patent life of Rubraca and extend through 2031 in Europe and 2035 in the U.S.

We recorded amortization expense of $1.3 million and $2.5 million related to capitalized milestone payments during the three and six months ended June 30, 2020, respectively. We recorded amortization expense of $1.2 million and $2.3 million related to capitalized milestone payments during the three and six months ended June 30, 2019, respectively. Amortization expense is included in cost of sales – intangible asset amortization on the Consolidated Statements of Operations and Comprehensive Loss.

Estimated future amortization expense associated with intangibles is expected to be as follows (in thousands):

2020 (remaining six months)	$	2,686
2021		5,371
2022		5,371
2023		5,371
2024		5,371
Thereafter		44,258
	$	68,428

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Other Accrued Expenses

6 Months Ended

Jun. 30, 2020

Other Accrued Expenses

Other Accrued Expenses

8. Other Accrued Expenses

Other accrued expenses were comprised of the following (in thousands):

	June 30,		December 31,
	2020		2019
Accrued personnel costs	$	12,101	$	16,915
Accrued interest payable for convertible senior notes		3,900		5,903
Income tax payable		871		3,505
Accrued corporate legal fees and professional services		920		310
Accrued royalties		6,082		6,038
Accrued variable considerations		8,303		5,748
Purchase of API received not yet invoiced		79		—
Accrued expenses - other		5,426		3,809
Total	$	37,682	$	42,228

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Lease

6 Months Ended

Jun. 30, 2020

Lease

Lease

9. Lease

At the inception of an arrangement, we determine whether the arrangement is or contains a lease based on the unique facts and circumstances. Most leases with a term greater than one year are recognized on the balance sheet as right-of-use assets, lease liabilities and, if applicable, long-term lease liabilities. We elected not to recognize on the balance sheet leases with terms of one year or less. Lease liabilities and their corresponding right-of-use assets are recorded based on the present value of lease payments over the expected lease term. The interest rate implicit in lease contracts is typically not readily determinable. As such, we utilize the appropriate incremental borrowing rate, which is the rate incurred to borrow on a collateralized basis over a similar term at an amount equal to the lease payments in a similar economic environment. Certain adjustments to the right-of-use asset may be required for items such as initial direct costs paid or incentives received.

The components of a lease should be split into three categories: lease components (e.g. land, building, etc.), non-lease components (e.g. common area maintenance, maintenance, consumables, etc.) and non-components (e.g. property taxes, insurance, etc.). Then the fixed and in-substance fixed contract consideration (including any related to non-components) must be allocated based on fair values assigned to the lease components and non-lease components.

Our facilities operating leases have lease components, non-lease components and non-components, which we have separated because the non-lease components and non-components have variable lease payments and are excluded from the measurement of the lease liabilities. The lease component results in a right-of-use asset being recorded on the balance sheet and amortized as lease expense on a straight-line basis to the statements of operations.

We lease all of our office facilities in the U.S. and Europe. Leases with an initial term of 12 months or less are not recorded on the balance sheet; we recognize lease expense for these leases on a straight-line basis over the lease term. Most leases include one or more options to renew. The exercise of lease renewal options is at our sole discretion. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants.

We have a finance lease for certain equipment at the dedicated production train at Lonza, our non-exclusive manufacturer of the Rubraca API.

The components of lease expense and related cash flows were as follows (in thousands):

	Three months ended June 30,		Three months ended June 30,
	2020		2019
Lease cost
Finance lease cost:
Amortization of right-of-use assets	$	474	$	356
Interest on lease liabilities		208		179
Operating lease cost		998		994
Short-term lease cost		116		48
Variable lease cost		472		645
Total lease cost	$	2,268	$	2,222
Operating cash flows from finance leases	$	208	$	179
Operating cash flows from operating leases	$	998	$	994
Financing cash flows from finance leases	$	364	$	255

	Six months ended June 30,		Six months ended June 30,
	2020		2019
Lease cost
Finance lease cost:
Amortization of right-of-use assets	$	947	$	712
Interest on lease liabilities		423		363
Operating lease cost		2,124		2,144
Short-term lease cost		222		97
Variable lease cost		1,070		1,369
Total lease cost	$	4,786	$	4,685
Operating cash flows from finance leases	$	423	$	363
Operating cash flows from operating leases	$	2,124	$	2,144
Financing cash flows from finance leases	$	720	$	505

The weighted-average remaining lease term and weighted-average discount rate were as follows:

	June 30, 2020		June 30, 2019
Weighted-average remaining lease term (years)
Operating leases		7.0		6.8
Finance leases		5.5		6.5
Weighted-average discount rate
Operating leases		8%		8%
Finance leases		8%		8%

Future minimum commitments due under these lease agreements as of June 30, 2020 are as follows (in thousands):

	Operating Leases		Finance Leases		Total
2020 (remaining six months)		2,814		1,143		3,957
2021		5,628		2,287		7,915
2022		5,177		2,287		7,464
2023		4,791		2,287		7,078
2024		4,798		2,287		7,085
Thereafter		14,619		2,287		16,906
Present value adjustment		(9,162)		(2,429)		(11,591)
Present value of lease payments	$	28,665	$	10,149	$	38,814

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Long-term Debt

6 Months Ended

Jun. 30, 2020

Long-term Debt

Long-term Debt

10. Long-term Debt

The following is a summary of our convertible senior notes at June 30, 2020:

		Principal Amount
	Interest Rate		(in thousands)	Due Date
2021 Notes	2.50%	$	64,418	September 15, 2021
2024 Notes	4.50%		150,624	August 1, 2024
2025 Notes	1.25%		300,000	May 1, 2025
Total		$	515,042

2021 Notes

In September 2014, we completed a private placement of $287.5 million aggregate principal amount of 2.5% convertible senior notes due 2021 (the “2021 Notes”) resulting in net proceeds of $278.3 million after deducting offering expenses. In accordance with the accounting guidance, the conversion feature did not meet the criteria for bifurcation, and the entire principal amount was recorded as a long-term liability on the Consolidated Balance Sheets.

The 2021 Notes are governed by the terms of the indenture between the Company, as issuer, and The Bank of New York Mellon Trust Company, N.A., as trustee. The 2021 Notes are senior unsecured obligations and bear interest at a rate of 2.5% per year, payable semi-annually in arrears on March 15 and September 15 of each year. The 2021 Notes will mature on September 15, 2021, unless earlier converted, redeemed or repurchased.

Holders may convert all or any portion of the 2021 Notes at any time prior to the close of business on the business day immediately preceding the maturity date. Upon conversion, the holders will receive shares of our common stock at an initial conversion rate of 16.1616 shares per $1,000 in principal amount of 2021 Notes, equivalent to a conversion price of approximately $61.88 per share. The conversion rate is subject to adjustment upon the occurrence of certain events described in the indenture. In addition, following certain corporate events that occur prior to the maturity date or upon our issuance of a notice of redemption, we will increase the conversion rate for holders who elect to convert the 2021 Notes in connection with such a corporate event or during the related redemption period in certain circumstances.

On or after September 15, 2018, we may redeem the 2021 Notes, at our option, in whole or in part, if the last reported sale price of our common stock has been at least 150% of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period ending not more than two trading days preceding the date on which we provide written notice of redemption at a redemption price equal to 100% of the principal amount of the 2021 Notes to be redeemed plus accrued and unpaid interest to, but excluding, the redemption date. No sinking fund is provided for the 2021 Notes.

If we undergo a fundamental change, as defined in the indenture, prior to the maturity date of the 2021 Notes, holders may require us to repurchase for cash all or any portion of the 2021 Notes at a fundamental change repurchase price equal to 100% of the principal amount of the 2021 Notes to be repurchased, plus accrued and unpaid interest to, but excluding, the fundamental change repurchase date.

The 2021 Notes rank senior in right of payment to any of our indebtedness that is expressly subordinated in right of payment to the 2021 Notes; equal in right of payment to all of our liabilities that are not so subordinated; effectively junior in right of payment to any secured indebtedness to the extent of the value of the assets securing such indebtedness; and structurally junior to all indebtedness and other liabilities (including trade payables) of our subsidiaries.

In connection with the issuance of the 2021 Notes, we incurred $9.2 million of debt issuance costs, of which $2.0 million of unamortized debt issuance costs were derecognized in connection with the repurchase of the 2021 Notes. The remaining debt issuance costs are presented as a deduction from the convertible senior notes on the Consolidated Balance Sheets and are amortized as interest expense over the expected life of the 2021 Notes using the effective interest method. We determined the expected life of the debt was equal to the seven-year term of the 2021 Notes.

In August 2019, we entered into privately negotiated transactions with a limited number of holders to repurchase $190.3 million aggregate principal amount of our outstanding 2021 Notes for an aggregate repurchase price of $171.8 million, including accrued interest. This repurchase resulted in the recognition of $18.5 million gain on extinguishment of debt.

In April 2020, we entered into a privately negotiated exchange agreement with a holder (“Holder”) of our 2021 Notes, pursuant to which we issued to such Holder of the 2021 Notes approximately $36.1 million in aggregate principal amount (the “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 (the “Exchange Transaction”), which resulted in a $3.3 million loss on extinguishment of debt. We did not receive any cash proceeds from the Exchange Transaction.

2024 Notes

In August 2019, we completed a private placement to qualified institutional buyers of $263.0 million aggregate principal amount of 4.50% convertible senior notes due 2024 (the “2024 Notes”) resulting in net proceeds of $254.9 million, after deducting underwriting discounts and commissions and offering expenses. In accordance with the accounting guidance, the conversion feature did not meet the criteria for bifurcation, and the entire principal amount was recorded as a long-term liability on the Consolidated Balance Sheets.

The 2024 Notes are governed by the terms of the indenture between the Company, as issuer, and The Bank of New York Mellon Trust Company, N.A., as trustee. The 2024 Notes are senior unsecured obligations and bear interest at a rate of 4.50% per year, payable semi-annually in arrears on February 1 and August 1 of each year. The 2024 Notes will mature on August 1, 2024, unless earlier repurchased or converted.

Holders may convert all or any portion of the 2024 Notes at any time prior to the close of business on the business day immediately preceding the maturity date. Upon conversion, the holders will receive shares of our common stock at an initial conversion rate of 137.2213 shares per $1,000 in principal amount of 2024 Notes, equivalent to a conversion price of approximately $7.29 per share. The conversion rate is subject to adjustment upon the occurrence of certain events described in the indenture. In addition, following certain corporate events that occur prior to the maturity date or upon our issuance of a notice of redemption, we will increase the conversion rate for holders who elect to convert the 2024 Notes in connection with such a corporate event or during the related redemption period in certain circumstances.

We will not have the right to redeem the 2024 Notes prior to their maturity. If we undergo a fundamental change, as defined in the indenture, prior to the maturity date of the 2024 Notes, holders may require us to repurchase for cash all or any portion of the 2024 Notes at a fundamental change repurchase price equal to 100% of the principal amount of the 2024 Notes to be repurchased, plus accrued and unpaid interest to, but excluding, the fundamental change repurchase date. No sinking fund is provided for the 2024 Notes.

The 2024 Notes rank senior in right of payment to any of our indebtedness that is expressly subordinated in right of payment to the 2024 Notes; equal in right of payment to all of our liabilities that are not so subordinated, including the 2021 Notes and 2025 Notes; effectively junior in right of payment to any secured indebtedness to the extent of the value of the assets securing such indebtedness, including our borrowing under the TPG financing agreement; and structurally junior to all indebtedness and other liabilities (including trade payables) of our subsidiaries.

In connection with the issuance of the 2024 Notes, we incurred $8.0 million of debt issuance costs. The debt issuance costs are presented as a deduction from the convertible senior notes on the Consolidated Balance Sheets and are

amortized as interest expense over the expected life of the 2024 Notes using the effective interest method. We determined the expected life of the debt was equal to the five-year term of the 2024 Notes.

In January 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. We used the proceeds of the share offering to repurchase 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. As a result of this transaction, $3.6 million of unamortized debt issuance costs were derecognized and we recognized a $7.8 million loss on the transactions.

In April 2020, we completed the Exchange Transaction discussed in the 2021 Notes section above.

The Additional 2024 Notes issued in the Exchange Transaction were issued as Additional Notes under that certain Indenture, dated as of August 13, 2019 (the “Indenture”), by and between the Company and The Bank of New York Mellon Trust Company, N.A., as trustee, and have substantially identical terms to our currently outstanding 2024 Notes, except that the Additional 2024 Notes will accrue interest from February 1, 2020 and the initial interest payment date on the Additional 2024 Notes will be August 1, 2020. The Holder paid to the Company accrued interest on the Additional 2024 Notes from February 1, 2020 to and including April 20, 2020. The Additional 2024 Notes will be treated as a single series of securities with the currently outstanding 2024 Notes.

In April and May 2020, approximately $24.3 million in principal amount of 2024 Notes were converted into 3,331,870 shares of our common stock at the conversion rate of 137.2213 shares per $1,000 in principal amount of 2024 Notes.

2025 Notes

In April 2018, we completed an underwritten public offering of $300.0 million aggregate principal amount of 1.25% convertible senior notes due 2025 (the “2025 Notes”) resulting in net proceeds of $290.9 million, after deducting underwriting discounts and commissions and offering expenses. In accordance with the accounting guidance, the conversion feature did not meet the criteria for bifurcation, and the entire principal amount was recorded as a long-term liability on the Consolidated Balance Sheets.

The 2025 Notes are governed by the terms of the indenture between the Company, as issuer, and The Bank of New York Mellon Trust Company, N.A., as trustee, as supplemented by the terms of that certain first supplemental indenture thereto. The 2025 Notes are senior unsecured obligations and bear interest at a rate of 1.25% per year, payable semi-annually in arrears on May 1 and November 1 of each year. The 2025 Notes will mature on May 1, 2025, unless earlier converted, redeemed or repurchased.

Holders may convert all or any portion of the 2025 Notes at any time prior to the close of business on the business day immediately preceding the maturity date. Upon conversion, the holders will receive shares of our common stock at an initial conversion rate of 13.1278 shares per $1,000 in principal amount of 2025 Notes, equivalent to a conversion price of approximately $76.17 per share. The conversion rate is subject to adjustment upon the occurrence of certain events described in the indenture. In addition, following certain corporate events that occur prior to the maturity date or upon our issuance of a notice of redemption, we will increase the conversion rate for holders who elect to convert the 2025 Notes in connection with such a corporate event or during the related redemption period in certain circumstances.

On or after May 2, 2022, we may redeem the 2025 Notes, at our option, in whole or in part, if the last reported sale price of our common stock has been at least 150% of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period ending not more than two trading days preceding the date on which we provide written notice of redemption at a redemption price equal to 100% of the principal amount of the 2025 Notes to be redeemed plus accrued and unpaid interest to, but excluding, the redemption date. No sinking fund is provided for the 2025 Notes.

If we undergo a fundamental change, as defined in the indenture, prior to the maturity date of the 2025 Notes, holders may require us to repurchase for cash all or any portion of the 2025 Notes at a fundamental change repurchase price equal to 100% of the principal amount of the 2025 Notes to be repurchased, plus accrued and unpaid interest to, but excluding, the fundamental change repurchase date.

The 2025 Notes rank senior in right of payment to any of our indebtedness that is expressly subordinated in right of payment to the 2025 Notes; equal in right of payment to all of our liabilities that are not so subordinated, including the 2021 Notes; effectively junior in right of payment to any secured indebtedness to the extent of the value of the assets securing such indebtedness; and structurally junior to all indebtedness and other liabilities (including trade payables) of our subsidiaries.

In connection with the issuance of the 2025 Notes, we incurred $9.1 million of debt issuance costs. The debt issuance costs are presented as a deduction from the convertible senior notes on the Consolidated Balance Sheets and are amortized as interest expense over the expected life of the 2025 Notes using the effective interest method. We determined the expected life of the debt was equal to the seven-year term of the 2025 Notes.

As of June 30, 2020 and December 31, 2019, the balance of unamortized debt issuance costs related to the 2021 Notes, 2024 Notes and 2025 Notes was $10.4 million and $15.4 million, respectively.

TPG Financing Agreement

On May 1, 2019, we entered into a financing agreement (the “Financing Agreement”) with certain affiliates of TPG Sixth Street Partners, LLC (“TPG”) in which we plan to borrow from TPG amounts required to reimburse our actual costs and expenses incurred during each fiscal quarter (limited to agreed budgeted amounts), as such expenses are incurred, related to the ATHENA clinical trial, in an aggregate amount of up to $175 million (the amount actually borrowed, the “Borrowed Amount”). ATHENA is our largest clinical trial, with a planned target enrollment of 1,000 patients across more than 270 sites in at least 25 countries. The Clovis-sponsored phase 3 ATHENA study in advanced ovarian cancer is the first-line maintenance treatment setting evaluating Rubraca plus nivolumab (PD-1 inhibitor), Rubraca, nivolumab and a placebo in newly-diagnosed patients who have completed platinum-based chemotherapy. This study initiated in the second quarter of 2018 and we completed target enrollment during the second quarter of 2020.

We incur borrowings under the Financing Agreement on a quarterly basis, beginning with such expenses incurred during the quarter ended March 31, 2019 and ending generally on the earliest to occur of (i) the termination of the ATHENA Trial, (ii) the date of completion of all activities under the ATHENA Trial Clinical Study Protocol, (iii) the date on which we pay the Discharge Amount (as defined in the Financing Agreement), (iv) the date of the occurrence of a change of control of us (or a sale of all or substantially all of our assets related to Rubraca) or our receipt of notice of certain breaches by us of our obligations under material in-license agreements related to Rubraca and (v) September 30, 2022.

We are obligated to repay on a quarterly basis, beginning on the earliest to occur of (i) the termination of the ATHENA Trial, (ii) the approval by the FDA of an update to the label portion of the Rubraca new drug application (“NDA”) to include in such label the treatment of an indication resulting from the ATHENA Trial, (iii) the date on which we determine that the results of the ATHENA Trial are insufficient to achieve such an expansion of the Rubraca label to cover an indication based on the ATHENA Trial and (iv) September 30, 2022 (the “Repayment Start Date”).

● 9.75% (which rate may be increased incrementally up to approximately 10.25% in the event the Borrowed Amount exceeds $166.5 million) of the direct Rubraca net sales recorded by us and our subsidiaries worldwide and our future out-licensees in the United States, if any, during such quarter;

● 19.5% of any royalty payments received by us and our subsidiaries during such quarter based on the sales of Rubraca by our future out-licensees outside the United States, if any; and

● 19.5% of any other amounts received by us and our subsidiaries in connection with any other commercialization arrangement for Rubraca, including any upfront and milestone payments and proceeds of infringement claims (which payments are not subject to the caps described below).

Quarterly payments are capped at $8.5 million, unless the label portion of the Rubraca NDA is expanded by the FDA to include such label the treatment of an indication resulting from the ATHENA Trial, in which case the quarterly payment is capped at $13.5 million. In the event the aggregate Borrowed Amount exceeds $166.5 million, such quarterly limits will be incrementally increased to a maximum of approximately $8.94 million and $14.19 million, respectively. The maximum amount required to be repaid under the agreement is two times the aggregate Borrowed Amount, which may be $350 million in the event we borrow the full $175 million under the Financing Agreement.

In the event we have not made payments on or before December 30, 2025 equal to at least the Borrowed Amount, we are required to make a lump sum payment in an amount equal to such Borrowed Amount less the aggregate of all prior quarterly payments described above. All other payments are contingent on the performance of Rubraca. There is no final maturity date on the Financing Agreement.

Our obligations under the Financing Agreement are secured under a Pledge and Security agreement by a first priority security interest in all of our assets related to Rubraca, including intellectual property rights and a pledge of the equity of our wholly owned subsidiaries, Clovis Oncology UK Limited and Clovis Oncology Ireland Limited. In addition, the obligations are guaranteed by Clovis Oncology UK Limited and Clovis Oncology Ireland Limited, secured by a first priority security interest in all the assets of those subsidiaries.

Pursuant to the Financing Agreement, we have agreed to certain limitations on our operations, including limitations on making certain restricted junior payments, including payment of dividends, limitation on liens and certain limitations on the ability of our non-guarantor subsidiaries to own certain assets related to Rubraca and to incur indebtedness.

We may terminate the Financing Agreement at any time by paying the lenders an amount (the “Discharge Amount”) equal to the sum of (a) (A) the greater of (x) the Borrowed Amount plus (i) if such date is during calendar year 2019, $35 million or (ii) if such date is during calendar year 2020 or thereafter, $50 million and (y) (i) if such date is prior to the Repayment Start Date, 1.75 times the Borrowed Amount or (ii) if such date is after the Repayment Start Date, 2.00 times the Borrowed Amount minus (B) the aggregate amount of all quarterly payments previously paid to the lenders plus (b) all other obligations which have accrued but which have not been paid under the loan documents, including expense reimbursement.

In the event of (i) a change of control of us, we must pay the Discharge Amount to the lenders and (ii) an event of default under the Financing Agreement (which includes, among other events, breaches or defaults under or terminations of our material in-license agreements related to Rubraca and defaults under our other material indebtedness), the lenders have the right to declare the Discharge Amount to be immediately due and payable.

For the six months ended June 30, 2020, we recorded $72.5 million as a long-term liability on the Consolidated Balance Sheets and future quarterly draws will be recorded as a long-term liability on the Consolidated Balance Sheets. In connection with the transaction, we incurred $1.8 million of debt issuance costs. The debt issuance costs are presented as a deduction from the TPG financing liability on the Consolidated Balance Sheets and are amortized as interest expense over the expected life of the Financing Agreement using the straight-line method. As of June 30, 2020, the balance of unamortized debt issuance costs was $1.6 million.

For the six months ended June 30, 2020, we used an effective interest rate of 14.5%. For subsequent periods, we will use the prospective method whereby a new effective interest rate is determined based on the revised estimate of remaining cash flows. The new rate is the discount rate that equates the present value of the revised estimate of remaining cash flows with the carrying amount of the debt, and it will be used to recognize interest expense for the remaining periods. Under this method, the effective interest rate is not constant, and any change in expected cash flows is recognized prospectively as an adjustment to the effective yield.

The following table sets forth total interest expense recognized during the three and six months ended June 30, 2020 and 2019 (in thousands):

	Three months ended June 30,				Six months ended June 30,
	2020		2019		2020		2019
Interest on convertible notes	$	2,811	$	2,734	$	5,994	$	5,469
Amortization of debt issuance costs		637		679		1,423		1,324
Debt issuance cost derecognized related to convertible debt transactions		789		—		4,344		—
Interest on finance lease		208		179		423		363
Interest on borrowings under financing agreement		2,264		199		4,055		199
Other interest		30		26		61		52
Total interest expense	$	6,739	$	3,817	$	16,300	$	7,407

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Stockholders' Equity

6 Months Ended

Jun. 30, 2020

Stockholders' Equity

Stockholders' Equity

11. Stockholders’ Equity

Common Stock

In May 2020, we sold 11,090,000 shares of our common stock in a public offering at $8.05 per share. The net proceeds from the offering were $82.8 million, after deducting underwriting discounts and commissions and offering expenses.

The holders of common stock are entitled to one vote per share on all matters to be voted upon by our stockholders. Subject to the preferences that may be applicable to any outstanding shares of preferred stock, the holders of common stock are entitled to receive ratably such dividends, if any, as may be declared by our Board of Directors.

Accumulated Other Comprehensive Loss

Accumulated other comprehensive loss consists of changes in foreign currency translation adjustments, which includes changes in a subsidiary’s functional currency, and unrealized gains and losses on available-for-sale securities.

The changes in accumulated balances related to each component of other comprehensive income (loss) are summarized for the three months ended June 30, 2020 and 2019, as follows (in thousands):

	Foreign Currency				Unrealized				Total Accumulated
	Translation Adjustments				(Losses) Gains				Other Comprehensive Loss
	2020		2019		2020		2019		2020		2019
Balance at April 1,	$	(44,835)	$	(44,465)	$	(55)	$	(99)	$	(44,890)	$	(44,564)
Other comprehensive income (loss)		61		(1)		(84)		77		(23)		76
Total before tax		(44,774)		(44,466)		(139)		(22)		(44,913)		(44,488)
Tax effect		—		—		—		—		—		—
Balance at June 30,	$	(44,774)	$	(44,466)	$	(139)	$	(22)	$	(44,913)	$	(44,488)

The changes in accumulated balances related to each component of other comprehensive income (loss) are summarized for the six months ended June 30, 2020 and 2019, as follows (in thousands):

	Foreign Currency				Unrealized				Total Accumulated
	Translation Adjustments				(Losses) Gains				Other Comprehensive Loss
	2020		2019		2020		2019		2020		2019
Balance at January 1,	$	(44,732)	$	(44,460)	$	(133)	$	(174)	$	(44,865)	$	(44,634)
Other comprehensive (loss) income		(42)		(6)		(6)		152		(48)		146
Total before tax		(44,774)		(44,466)		(139)		(22)		(44,913)		(44,488)
Tax effect		—		—		—		—		—		—
Balance at June 30,	$	(44,774)	$	(44,466)	$	(139)	$	(22)	$	(44,913)	$	(44,488)

There were no reclassifications out of accumulated other comprehensive loss in each of the three and six months ended June 30, 2020 and 2019.

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Share-Based Compensation

6 Months Ended

Jun. 30, 2020

Share-Based Compensation

Share-Based Compensation

12. Share-Based Compensation

Share-based compensation expense for all equity-based programs, including stock options, restricted stock units and the employee stock purchase plan, for the three and six months ended June 30, 2020 and 2019 was recognized in the accompanying Consolidated Statements of Operations and Comprehensive Loss as follows (in thousands):

	Three months ended June 30,				Six months ended June 30,
	2020		2019		2020		2019
Research and development	$	6,636	$	6,633	$	13,561	$	13,244
Selling, general and administrative		6,677		7,497		12,713		14,525
Total share-based compensation expense	$	13,313	$	14,130	$	26,274	$	27,769

We did not recognize a tax benefit related to share-based compensation expense during the three and six months ended June 31, 2020 and 2019, as we maintain net operating loss carryforwards and have established a valuation allowance against the entire net deferred tax asset as of June 30, 2020.

Stock Options

The following table summarizes the activity relating to our options to purchase common stock for the six months ended June 30, 2020:

				Weighted
		Weighted		Average	Aggregate
		Average		Remaining	Intrinsic
	Number of	Exercise		Contractual	Value
	Options	Price		Term (Years)	(Thousands)
Outstanding at December 31, 2019	6,287,025	$	42.24
Granted	870,492		7.61
Exercised	(24,153)		3.08
Forfeited	(346,100)		48.18
Outstanding at June 30, 2020	6,787,264	$	37.63	6.1	$	851
Vested and expected to vest at June 30, 2020	6,606,555	$	38.12	6.0	$	806
Vested and exercisable at June 30, 2020	4,912,792	$	44.14	5.0	$	350

The aggregate intrinsic value in the table above represents the pretax intrinsic value, based on our closing stock price of $6.75 as of June 30, 2020, which would have been received by the option holders had all option holders with in-the-money options exercised their options as of that date.

The following table summarizes information about our stock options as of and for the three and six months ended June 30, 2020 and 2019 (in thousands, except per share amounts):

	Three months ended June 30,				Six months ended June 30,
	2020		2019		2020		2019
Weighted-average grant date fair value per share	$	5.06	$	11.33	$	5.87	$	15.81
Intrinsic value of options exercised	$	87	$	198	$	91	$	963
Cash received from stock option exercises	$	72	$	222	$	74	$	1,316

As of June 30, 2020, the unrecognized share-based compensation expense related to unvested options, adjusted for expected forfeitures, was $28.2 million and the estimated weighted-average remaining vesting period was 1.8 years.

Restricted Stock

The following table summarizes the activity relating to our unvested restricted stock units (“RSUs”) for the six months ended June 30, 2020:

		Weighted
		Average
	Number of	Grant Date
	Units	Fair Value
Unvested at December 31, 2019	2,171,347	$	28.37
Granted	2,392,428		8.27
Vested	(775,784)		28.10
Forfeited	(276,398)		19.18
Unvested at June 30, 2020	3,511,593	$	15.46
Expected to vest after June 30, 2020	(3,351,795)	$	14.97

As of June 30, 2020, the unrecognized share-based compensation expense related to unvested RSUs, adjusted for expected forfeitures, was $49.1 million and the estimated weighted-average remaining vesting period was 2.3 years.

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License Agreements

6 Months Ended

Jun. 30, 2020

License Agreements

License Agreements

13. License Agreements

Rucaparib

In June 2011, we entered into a license agreement with Pfizer, Inc. (“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.

On August 30, 2016, we entered into a first amendment to the worldwide license agreement with Pfizer, which amends the June 2011 existing worldwide license agreement to permit us to defer payment of the milestone payments payable upon (i) FDA approval of an NDA for 1^st Indication in US and (ii) EMA approval of an MAA for 1^st Indication in the EU, to a date that is 18 months after the date of achievement of such milestones.

On December 19, 2016, Rubraca received its initial FDA approval. This approval resulted in a $0.75 million milestone payment to Pfizer as required by the license agreement, which was paid in the first quarter of 2017. This FDA approval also resulted in an obligation to pay a $20.0 million milestone payment, for which we exercised the option to defer payment by agreeing to pay $23.0 million within 18 months after the date of the FDA approval. We paid the $23.0 million milestone payment in June 2018.

In April, 2018, Rubraca received a second FDA approval. This approval resulted in an obligation to pay a $15.0 million milestone payment, which we paid in April 2018.

In May 2018, Rubraca received its initial European Commission marketing authorization. This approval resulted in an obligation to pay a $20.0 million milestone payment, which we paid in June 2018.

In January 2019, Rubraca received a second European Commission approval. This approval resulted in an obligation to pay a $15.0 million milestone payment, which we paid in February 2019.

In June 2019, we paid a $0.75 million milestone payment due to the launch of Rubraca as maintenance therapy in Germany in March 2019.

In May 2020, Rubraca received a third FDA approval for Rubraca as a monotherapy treatment of adult patients with BRCA1/2-mutant recurrent, metastatic castrate-resistant prostate cancer. This approval resulted in an obligation to pay an $8.0 million milestone payment, which we paid in June 2020.

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.

In April 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.

Lucitanib

On November 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 of November 19, 2013 (the “Stock Purchase Agreement”), by and among the Company, EOS, its shareholders (the “Sellers”) and Sofinnova 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. 

In October 2008, Ethical Oncology Science, S.p.A. (“EOS”) (now known as Clovis Oncology Italy S.r.l.) entered into an exclusive license agreement with Advenchen Laboratories LLC (“Advenchen”) to develop and commercialize lucitanib on a global basis, excluding China.

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.

FAP Program

In September 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 signing of the license and collaboration agreement in September 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.

In February 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 effective December 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.

Pursuant to terms of each of our product license agreements, we will pay royalties to our licensors on sales, if any, of the respective products.

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Net Loss Per Common Share

6 Months Ended

Jun. 30, 2020

Net Loss Per Common Share

Net Loss Per Common Share

14. Net Loss Per Common Share

Basic net loss per share is calculated by dividing net loss by the weighted-average number of common shares outstanding during the period. Diluted net loss per share is computed by dividing net loss by the weighted-average number of common share equivalents outstanding using the treasury-stock method for the stock options and RSUs and the if-converted method for the 2021 Notes, 2025 Notes and 2024 Notes. As a result of our net losses for the periods presented, all potentially dilutive common share equivalents were considered anti-dilutive and were excluded from the computation of diluted net loss per share.

The shares outstanding at the end of the respective periods presented in the table below were excluded from the calculation of diluted net loss per share due to their anti-dilutive effect (in thousands):

	Three and six months ended June 30,
	2020	2019
Common shares under option plans	4,156	3,133
Convertible senior notes	25,648	8,584
Total potential dilutive shares	29,804	11,717

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Commitments and Contingencies

6 Months Ended

Jun. 30, 2020

Commitments and Contingencies

Commitments and Contingencies

15. Commitments and Contingencies

Royalty and License Fee Commitments

We have entered into certain license agreements, as identified in Note 13, License Agreements, with third parties that include the payment of development and regulatory milestones, as well as royalty payments, upon the achievement of pre-established development, regulatory and commercial targets. Our payment obligation related to these license agreements is contingent upon the successful development, regulatory approval and commercialization of the licensed products. Due to the nature of these arrangements, the future potential payments are inherently uncertain, and accordingly, we only recognize payment obligations which are probable and estimable as of the balance sheet date.

Manufacture and Services Agreement Commitments

On October 3, 2016, we entered into a Manufacturing and Services Agreement (the “Agreement”) with a non-exclusive third-party supplier for the production of the active ingredient for Rubraca. Under the terms of the Agreement, we will provide the third-party supplier a rolling forecast for the supply of the active ingredient in Rubraca that will be updated by us on a quarterly basis. We are obligated to order material sufficient to satisfy an initial quantity specified in a forecast. In addition, the third-party supplier will construct, in its existing facility, a production train that will be exclusively dedicated to the manufacture of the Rubraca active ingredient. We are obligated to make scheduled capital program fee payments toward capital equipment and other costs associated with the construction of the dedicated production train. Further, once the facility is operational, we are obligated to pay a fixed facility fee each quarter for the duration of the Agreement, which expires on December 31, 2025, unless extended by mutual consent of the parties. As of June 30, 2020, $74.5 million of purchase commitments exist under the Agreement.

At the time we entered into the Agreement, we evaluated the Agreement as a whole and bifurcated into lease and non-lease components, which consisted of an operating lease of warehouse space, capital lease of equipment, purchase of leasehold improvements and manufacturing costs based upon the relative fair values of each of the deliverables. During October 2018, the production train was placed into service and we recorded the various components of the Agreement.

Legal Proceedings

We and certain of our officers were named as defendants in several lawsuits, as described below. We cannot reasonably predict the outcome of these legal proceedings, nor can we estimate the amount of loss or range of loss, if any, that may result. An adverse outcome in these proceedings could have a material adverse effect on our results of operations, cash flows or financial condition.

Rociletinib-Related Litigation

Following Clovis’ regulatory announcement in November 2015 of adverse developments in its ongoing clinical trials for rociletinib, Clovis and certain of its current and former executives were named in various securities lawsuits, the largest of which was a putative class action lawsuit in the District of Colorado (the “Medina Action”) which was settled on October 26, 2017 (the “Medina Settlement”). The remaining actions are discussed below.

In March 2017, two putative shareholders of the Company, Macalinao and McKenry (the “Derivative Plaintiffs”), filed shareholder derivative complaints against certain directors and officers of the Company in the Court of Chancery of the State of Delaware. On May 4, 2017, the Macalinao and McKenry actions were consolidated for all purposes in a single proceeding under the caption In re Clovis Oncology, Inc. Derivative Litigation, Case No, 2017-0222 (the “Consolidated Derivative Action”).  

On May 18, 2017, the Derivative Plaintiffs filed a Consolidated Verified Shareholder Derivative Complaint (the “Consolidated Derivative Complaint”). The Consolidated Derivative Complaint generally alleged that the defendants breached their fiduciary duties owed to the Company by allegedly causing or allowing misrepresentations of the Company’s business operations and prospects, failing to ensure that the TIGER-X clinical trial was being conducted in accordance with applicable rules, regulations and protocols, and engaging in insider trading. The Consolidated Derivative Complaint sought, among other things, an award of money damages.  

On July 31, 2017, the defendants filed a motion to dismiss the Consolidated Derivative Complaint. Plaintiffs filed an opposition to the motion to dismiss on August 31, 2017, and the defendants filed a reply in further support of the motion to dismiss on September 26, 2017.

While the motion to dismiss remained pending, on November 19, 2018, Plaintiffs filed a motion for leave to file a supplemental consolidated complaint, and on November 20, 2018, the Court granted that motion. On November 27, 2018, Plaintiffs filed their supplemental complaint (the “Supplemental Derivative Complaint”), which adds allegations concerning the Company’s, Mr. Mahaffy’s and Mr. Mast’s settlements with the United States Securities and Exchange Commission. Pursuant to a briefing schedule entered by the Court, the defendants filed a supplemental motion to dismiss the Supplemental Derivative Complaint on February 6, 2019; plaintiffs filed an opposition brief on February 22, 2019; and the defendants filed a reply brief on March 5, 2019. The Court held oral arguments on the defendants’ motions to

dismiss on June 19, 2019. At the oral arguments, the Court ordered the parties to submit supplemental letter briefs on the motion to dismiss.

On October 1, 2019, Vice Chancellor Joseph R. Slights III of the Delaware Chancery Court, issued a Memorandum Opinion granting in part and denying in part defendants’ motions to dismiss. The Supplemental Derivative Complaint was dismissed as to Plaintiffs’ derivative claims for unjust enrichment and insider trading. The Court allowed Plaintiffs’ remaining derivative claim for breach of fiduciary duty to proceed. Defendants filed an answer to the Supplemental Derivative Complaint on December 27, 2019.

On December 17, 2019, the parties participated in a mediation, which did not result in a settlement. On December 22, 2019, the Company’s board of directors formed a Special Litigation Committee (the “SLC”) to conduct an investigation of the claims asserted in the Supplemental Derivative Complaint. On February 18, 2020, the SLC moved to stay all proceedings in the Consolidated Derivative Action pending completion of its investigation. Plaintiffs filed their opposition to the motion to stay on March 3, 2020 and the SLC filed its reply on March 13, 2020. On May 12, 2020, after hearing oral argument, Vice Chancellor Slights granted the SLC’s motion to stay proceedings until September 18, 2020 so that the SLC may complete its investigation.

While the SLC’s investigation remains ongoing, the Company does not believe this litigation will have a material impact on its financial position or results of operations.

On March 20, 2017, a purported shareholder of the Company, filed a shareholder derivative complaint (the “Guo Complaint”) against certain officers and directors of the Company in the United States District Court for the District of Colorado. The Guo Complaint generally alleged that the defendants breached their fiduciary duties owed to the Company by either recklessly or with gross negligence approving or permitting misrepresentations of the Company’s business operations and prospects. The Guo Complaint also alleged claims for waste of corporate assets and unjust enrichment. Finally, the Guo Complaint alleged that certain of the individual defendants violated Section 14(a) of the Securities Exchange Act, by allegedly negligently issuing, causing to be issued, and participating in the issuance of materially misleading statements to stockholders in the Company’s Proxy Statement on Schedule DEF 14A in connection with the 2015 Annual Meeting of Stockholders, held on June 11, 2015. The Guo Complaint sought, among other things, an award of money damages.  

On June 19, 2017, the parties filed a joint motion to stay the Guo action pending resolution of the motion to dismiss the Consolidated Derivative Complaint. On June 20, 2017, the court granted the motion to stay. Based on the October 1, 2019 ruling in the Consolidated Derivative Action, on October 22, 2019, the court lifted the stay. The parties participated in a scheduling conference on December 9, 2019, following which the court set the dates for pre-trial conference and trial for March 2, 2021 and March 29, 2021, respectively. On December 23, 2019, the plaintiff filed an amended complaint, and on February 7, 2020, the plaintiff filed a second amended complaint. On February 28, 2020, the defendants moved to dismiss the second amended Guo complaint. The plaintiff filed an opposition to the motion to dismiss on March 20, 2020 and the defendants filed their reply on April 3, 2020.

The Company intends to vigorously defend against the allegations in the second amended Guo complaint, but there can be no assurance that the defense will be successful.

European Patent Opposition

Oppositions were filed in the granted European counterparts of two patents in the rucaparib camsylate salt/polymorph patent family. An opposition of European patent 2534153 was filed by two opponents on June 20, 2017. The European Patent Office’s Opposition Division held an oral hearing on December 4, 2018, during which it upheld claims, narrowed from the originally granted patent, to certain crystalline forms of rucaparib camsylate, including, but not limited to, rucaparib S-camsylate Form A, the crystalline form in Rubraca. Clovis and one opponent, Hexal, appealed the written decision of the European Opposition Division and filed reply appeal briefs in early November 2019. An opposition of European patent 3150610, a divisional patent of European patent 2534153, was filed on April 30, 2020. The divisional patent includes claims directed to use of rucaparib in a method of inhibiting PARP activity or treating cancer. The grounds of opposition for the divisional patent were lack of novelty, lack of inventive step, added subject matter, and insufficient disclosure – similar grounds on which the parent patent was opposed. It is common for an opponent to raise these grounds in an opposition. During examination, the European Patent Office considers all of these grounds and considered the application to comply with the applicable law when granting the patent. In particular, the

novelty and inventive step challenges to the divisional patent are based on prior art references (or closely related disclosures) that were cited by the European patent examiner during prosecution of the application. As part of the proceeding, we have the opportunity to submit further arguments and pursue alternative claims in the form of auxiliary requests. While the ultimate results of patent challenges can be difficult to predict, we believe a number of factors support the patentability of this rucaparib use patent. We believe a successful challenge of all claims would be difficult. Clovis’ response is due on October 28, 2020. In Europe, regulatory exclusivity is available for ten years, plus one year for a new indication, therefore, we have regulatory exclusivity for Rubraca in Europe until 2028, and if an additional indication is approved, until 2029.

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Summary of Significant Accounting Policies (Policies)

6 Months Ended

Jun. 30, 2020

Summary of Significant Accounting Policies

Basis of Presentation

Basis of Presentation

All financial information presented includes the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.

The unaudited financial statements of Clovis Oncology, Inc. included herein reflect all adjustments that, in the opinion of management, are necessary to fairly state our financial position, results of operations and cash flows for the periods presented herein. Interim results may not be indicative of the results that may be expected for the full year. Certain information and footnote disclosures normally included in audited financial statements prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) have been condensed or omitted pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”). These financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto which are included in our Annual Report on Form 10-K for the year ended December 31, 2019 (“2019 Form 10-K”) for a broader discussion of our business and the opportunities and risks inherent in such business.

Use of Estimates

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, expenses and revenue and related disclosures. On an ongoing basis, we evaluate our estimates, including estimates related to revenue deductions, intangible asset impairment, clinical trial accruals and share-based compensation expense. We base our estimates on historical experience and other market-specific or other relevant assumptions that we believe to be reasonable under the circumstances. Actual results may differ from those estimates or assumptions.

Liquidity

Liquidity

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. 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.

Based on current estimates, we believe that our existing cash, cash equivalents and available-for-sale securities will allow us to fund our operating plan through at least the next 12 months.

Recently Adopted Accounting Standards

Recently Adopted Accounting Standards

In June 2016, the FASB issued ASU 2016-13, “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments”. The guidance is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted. We adopted ASU 2016-13 as of January 1, 2020. Upon the adoption of ASU 2016-13 on January 1, 2020, we are required to determine whether a decline in the fair value below the amortized cost basis (i.e., impairment) of an available-for-sale debt is security is due to credit-related factors or noncredit-related factors. Any impairment that is not credit related is recognized in accumulated other comprehensive loss, net of applicable taxes. When evaluating an impairment, entities may not use the length of time a security has been in an unrealized loss position as a factor, either by itself or in combination with other factors, to conclude that a credit loss does not exist. We applied this impairment model for available-for-sale debt securities as of January 1, 2020 and no impairment was recognized upon adoption. In addition, no impairment was recognized for the three and six months ended June 30, 2020. We recognized a minimal allowance for credit losses related to our accounts receivable at June 30, 2020. The adoption of ASU 2016-13 did not materially impact our consolidated financial statements and disclosures.

In August 2018, the FASB issued ASU 2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement”. The guidance is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. We adopted ASU 2018-02 as of January 1, 2020 and there was no material impact on our consolidated financial statements and related disclosures.

Revenue Recognition

Revenue Recognition

We are currently approved to sell Rubraca in the United States and Europe markets. 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 health care providers. Separately, we have arrangements with certain payors and other third parties that provide for government-mandated and privately-negotiated rebates, chargebacks and discounts. 

Product Revenue

Revenue from product sales are recognized when the performance obligation is satisfied, which is when customers obtain control of our product at a point in time, typically upon delivery. We expense incremental costs of obtaining a contract as and when incurred if the expected amortization period of the asset that we would have recognized is one year or less.

Reserves for Variable Consideration

Revenues from product sales are recorded at the net sales price (transaction price), which includes estimates of variable consideration for which reserves are established and which result from price concessions that include rebates, chargebacks, discounts, co-pay assistance, estimated product returns and other allowances that are offered within contracts between us and our customers, health care providers, payors and other indirect customers relating to the sales of our product. These reserves are based on the amounts earned or to be claimed on the related sales and are classified as reductions of accounts receivable (if the amount is payable to the customers) or a current liability (if the amount is

payable to a party other than a customer). Where appropriate, these estimates take into consideration a range of possible outcomes which are probability-weighted for relevant factors such as our historical experience, current contractual and statutory requirements, specific known market events and trends, industry data and forecasted customer buying and payment patterns. Overall, these reserves reflect our best estimates of the amount of consideration to which we are entitled based on the terms of the contract. The amount of variable consideration which is included in the transaction price may be constrained and is included in the net sales price only to the extent that it is probable that a significant reversal in the amount of the cumulative revenue recognized will not occur in a future period. Actual amounts of consideration ultimately received may differ from our estimates. If actual results in the future vary from our estimates, we adjust these estimates, which would affect product revenue and earnings in the period such variances become known.

Government Rebates. Rebates include mandated discounts under the Medicaid Drug Rebate Program, the Medicare coverage gap program, the Tricare health program and various European National Health Service, Sick Fund and Clawback programs. Rebates are amounts owed after the final dispensing of products to a benefit plan participant and are based upon contractual agreements or legal requirements with the public-sector benefit providers. These reserves are recorded in the same period the related revenue is recognized, resulting in a reduction of product revenue and the establishment of a current liability which is included in accrued expenses on the Consolidated Balance Sheets. Our rebate estimates are based upon a range of possible outcomes that are probability-weighted for the estimated payor mix. The accrual for rebates is based on the expected utilization from historical data we have accumulated since the Rubraca product launch.

GPO and Payor Rebates. We contract with various private payor organizations and group purchasing organizations (“GPO”), primarily insurance companies, pharmacy benefit managers and hospitals, for the payment of rebates with respect to utilization of our products. We estimate these rebates and record such estimates in the same period the related revenue is recognized, resulting in a reduction of product revenue and the establishment of a current liability.

Chargebacks. Chargebacks are discounts that occur when contracted customers, which currently consist primarily of group purchasing organizations, Public Health Service (“PHS”) organizations and federal government entities purchasing via the Federal Supply Schedule, purchase directly from our specialty distributors at a discounted price. The specialty distributor, in turn, charges back the difference between the price initially paid by the specialty distributor and the discounted price paid to the specialty distributor by the healthcare provider. These reserves are established in the same period that the related revenue is recognized, resulting in a reduction of product revenue and accounts receivable. The accrual for specialty distributor chargebacks is estimated based on known chargeback rates and known sales to specialty distributors adjusted for the estimated utilization by healthcare providers.

Discounts and Fees. Our payment terms are generally 30 days. Specialty distributors and specialty pharmacies are offered various forms of consideration, including service fees and prompt pay discounts for payment within a specified period. We expect these customers will earn prompt pay discounts and therefore, we deduct the full amount of these discounts and service fees from product sales when revenue is recognized.

Co-pay assistance. Patients who have commercial insurance and meet certain eligibility requirements may receive co-pay assistance. The intent of this program is to reduce the patient’s out of pocket costs. Liabilities for co-pay assistance are based on actual program participation provided by third-party administrators at month end.

Returns. Consistent with industry practice, we generally offer customers a right of return limited only to product that will expire in six months or product that is six months beyond the expiration date. To date, we have had minimal product returns and we currently do not have an accrual for product returns. We will continue to assess our estimate for product returns as we gain additional historical experience.

Cost of Sales

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.

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.

Accounts Receivable

Accounts Receivable

As a result of the adoption of ASU 2016-13, we recognized a minimal allowance for credit losses related to our accounts receivable at June 30, 2020. We provide an allowance for doubtful accounts based on experience and specifically identified risks. Accounts receivable are charged off against the allowance for doubtful accounts when we determine that recovery is unlikely and we cease collection efforts.

Inventory

Inventory

Inventories are stated at the lower of cost or estimated net realizable value, on a first-in, first-out (“FIFO”) basis. Inventories include active pharmaceutical ingredient (“API”), contract manufacturing costs and overhead allocations. We began capitalizing incurred inventory related costs upon the regulatory approval of Rubraca. Prior to the regulatory approval of Rubraca, we incurred costs for the manufacture of the drug that could potentially be available to support the commercial launch of Rubraca and all such costs were recognized as research and development expense.

We regularly analyze our inventory levels for excess quantities and obsolescence (expiration), taking into account factors such as historical and anticipated future sales compared to quantities on hand and the remaining shelf-life of Rubraca. Rubraca finished goods have a shelf-life of four years from the date of manufacture. We expect to sell the finished goods prior to expiration. The API currently has a shelf-life of four years from the date of manufacture but can be retested at an immaterial cost with no expected reduction in potency, thereby extending its shelf-life as needed. We expect to consume substantially all of the API over a period of approximately six years based on our long-range sales projections of Rubraca.

We write down inventory that has become obsolete, inventory that has a cost basis in excess of its estimated realizable value and/or inventory in excess of expected sales requirements. Expired inventory would be disposed of and the related costs would be written off as cost of product revenue. Inventories that are not expected to be consumed within 12 months following the balance sheet date are classified as long-term inventories. Long-term inventories primarily consist of API.

API is currently produced by Lonza. As the API has undergone significant manufacturing specific to its intended purpose at the point it is purchased by us, we classify the API as work-in-process inventory. In addition, we currently manufacture Rubraca finished goods with a single third-party manufacturer. The disruption or termination of the supply of API or the disruption or termination of the manufacturing of our commercial products could have a material adverse effect on our business, financial position and results of operations. API that is written off due to damage and certain costs related to our dedicated production train at Lonza are included in Other Operating Expenses in the Consolidated Statements of Operations and Comprehensive Loss.

Inventory used in clinical trials is expensed as research and development expense when it has been identified for such use.

Convertible Senior Notes

The remaining debt issuance costs are presented as a deduction from the convertible senior notes on the Consolidated Balance Sheets and are amortized as interest expense over the expected life of the 2021 Notes using the effective interest method. We determined the expected life of the debt was equal to the seven-year term of the 2021 Notes.

Net Loss Per Common Share

Basic net loss per share is calculated by dividing net loss by the weighted-average number of common shares outstanding during the period. Diluted net loss per share is computed by dividing net loss by the weighted-average number of common share equivalents outstanding using the treasury-stock method for the stock options and RSUs and the if-converted method for the 2021 Notes, 2025 Notes and 2024 Notes. As a result of our net losses for the periods presented, all potentially dilutive common share equivalents were considered anti-dilutive and were excluded from the computation of diluted net loss per share.

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Financial Instruments and Fair Value Measurements (Tables)

6 Months Ended

Jun. 30, 2020

Fair Value Measurements

Assets Measured at Fair Value on Recurring Basis

The following table identifies our assets and liabilities that were measured at fair value on a recurring basis (in thousands):

	Balance		Level 1		Level 2		Level 3
June 30, 2020
Assets:
Money market	$	147,902	$	147,902	$	—	$	—
U.S. treasury securities		—		—		—		—
Total assets at fair value	$	147,902	$	147,902	$	—	$	—
December 31, 2019
Assets:
Money market	$	61,882	$	61,882	$	—	$	—
U.S. treasury securities		189,736		54,910		134,826		—
Total assets at fair value	$	251,618	$	116,792	$	134,826	$	—

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Available-for-Sale Securities (Tables)

6 Months Ended

Jun. 30, 2020

Available-for-Sale Securities

Summary of Available-for-Sale Securities

We did not have available-for-sale securities as of June 30, 2020.

As of December 31, 2019, available-for-sale securities consisted of the following (in thousands):

			Gross		Gross		Aggregate
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
U.S. treasury securities	$	134,826	$	—	$	—	$	134,826

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Inventories (Tables)

6 Months Ended

Jun. 30, 2020

Inventories

Schedule of Inventories

	June 30,		December 31,
	2020		2019
Work-in-process	$	103,871	$	104,139
Finished goods, net		29,317		20,433
Total inventories	$	133,188	$	124,572

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Other Current Assets (Tables)

6 Months Ended

Jun. 30, 2020

Other Current Assets

Schedule Of other current assets

Other current assets were comprised of the following (in thousands):

	June 30,		December 31,
	2020		2019
Prepaid insurance	$	1,913	$	505
Prepaid IT		796		698
Prepaid expenses - other		4,235		3,371
Value-added tax ("VAT") receivable		6,364		11,920
Receivable - other		1,111		2,176
Other		96		177
Total	$	14,515	$	18,847

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Intangible Assets and Goodwill (Tables)

6 Months Ended

Jun. 30, 2020

Intangible Assets and Goodwill

Intangible assets related to capitalized milestones under license agreements

Intangible assets related to capitalized milestones under license agreements consisted of the following (in thousands):

	June 30,		December 31,
	2020		2019
Intangible asset - milestones	$	79,850	$	71,850
Accumulated amortization		(11,422)		(8,930)
Total intangible asset, net	$	68,428	$	62,920

Estimated future amortization expense for intangible assets

Estimated future amortization expense associated with intangibles is expected to be as follows (in thousands):

2020 (remaining six months)	$	2,686
2021		5,371
2022		5,371
2023		5,371
2024		5,371
Thereafter		44,258
	$	68,428

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Other Accrued Expenses (Tables)

6 Months Ended

Jun. 30, 2020

Other Accrued Expenses

Schedule of other accrued expenses

Other accrued expenses were comprised of the following (in thousands):

	June 30,		December 31,
	2020		2019
Accrued personnel costs	$	12,101	$	16,915
Accrued interest payable for convertible senior notes		3,900		5,903
Income tax payable		871		3,505
Accrued corporate legal fees and professional services		920		310
Accrued royalties		6,082		6,038
Accrued variable considerations		8,303		5,748
Purchase of API received not yet invoiced		79		—
Accrued expenses - other		5,426		3,809
Total	$	37,682	$	42,228

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Lease (Tables)

6 Months Ended

Jun. 30, 2020

Lease

Schedule of components of lease expense and related cash flows

The components of lease expense and related cash flows were as follows (in thousands):

	Three months ended June 30,		Three months ended June 30,
	2020		2019
Lease cost
Finance lease cost:
Amortization of right-of-use assets	$	474	$	356
Interest on lease liabilities		208		179
Operating lease cost		998		994
Short-term lease cost		116		48
Variable lease cost		472		645
Total lease cost	$	2,268	$	2,222
Operating cash flows from finance leases	$	208	$	179
Operating cash flows from operating leases	$	998	$	994
Financing cash flows from finance leases	$	364	$	255

	Six months ended June 30,		Six months ended June 30,
	2020		2019
Lease cost
Finance lease cost:
Amortization of right-of-use assets	$	947	$	712
Interest on lease liabilities		423		363
Operating lease cost		2,124		2,144
Short-term lease cost		222		97
Variable lease cost		1,070		1,369
Total lease cost	$	4,786	$	4,685
Operating cash flows from finance leases	$	423	$	363
Operating cash flows from operating leases	$	2,124	$	2,144
Financing cash flows from finance leases	$	720	$	505

Schedule of weighted-average remaining lease term and weighted-average discount rate

	June 30, 2020		June 30, 2019
Weighted-average remaining lease term (years)
Operating leases		7.0		6.8
Finance leases		5.5		6.5
Weighted-average discount rate
Operating leases		8%		8%
Finance leases		8%		8%

Schedule of future minimum commitments due under lease agreements

	Operating Leases		Finance Leases		Total
2020 (remaining six months)		2,814		1,143		3,957
2021		5,628		2,287		7,915
2022		5,177		2,287		7,464
2023		4,791		2,287		7,078
2024		4,798		2,287		7,085
Thereafter		14,619		2,287		16,906
Present value adjustment		(9,162)		(2,429)		(11,591)
Present value of lease payments	$	28,665	$	10,149	$	38,814

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Long-term Debt (Tables)

6 Months Ended

Jun. 30, 2020

Long-term Debt

Schedule of Future Annual Principal Payments on Convertible Senior Notes

The following is a summary of our convertible senior notes at June 30, 2020:

		Principal Amount
	Interest Rate		(in thousands)	Due Date
2021 Notes	2.50%	$	64,418	September 15, 2021
2024 Notes	4.50%		150,624	August 1, 2024
2025 Notes	1.25%		300,000	May 1, 2025
Total		$	515,042

Schedule of Total Interest Expense Recognized Related to Notes

	Three months ended June 30,				Six months ended June 30,
	2020		2019		2020		2019
Interest on convertible notes	$	2,811	$	2,734	$	5,994	$	5,469
Amortization of debt issuance costs		637		679		1,423		1,324
Debt issuance cost derecognized related to convertible debt transactions		789		—		4,344		—
Interest on finance lease		208		179		423		363
Interest on borrowings under financing agreement		2,264		199		4,055		199
Other interest		30		26		61		52
Total interest expense	$	6,739	$	3,817	$	16,300	$	7,407

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Stockholders' Equity (Tables)

6 Months Ended

Jun. 30, 2020

Stockholders' Equity

Component of Other Comprehensive Income (Loss)

The changes in accumulated balances related to each component of other comprehensive income (loss) are summarized for the three months ended June 30, 2020 and 2019, as follows (in thousands):

	Foreign Currency				Unrealized				Total Accumulated
	Translation Adjustments				(Losses) Gains				Other Comprehensive Loss
	2020		2019		2020		2019		2020		2019
Balance at April 1,	$	(44,835)	$	(44,465)	$	(55)	$	(99)	$	(44,890)	$	(44,564)
Other comprehensive income (loss)		61		(1)		(84)		77		(23)		76
Total before tax		(44,774)		(44,466)		(139)		(22)		(44,913)		(44,488)
Tax effect		—		—		—		—		—		—
Balance at June 30,	$	(44,774)	$	(44,466)	$	(139)	$	(22)	$	(44,913)	$	(44,488)

The changes in accumulated balances related to each component of other comprehensive income (loss) are summarized for the six months ended June 30, 2020 and 2019, as follows (in thousands):

	Foreign Currency				Unrealized				Total Accumulated
	Translation Adjustments				(Losses) Gains				Other Comprehensive Loss
	2020		2019		2020		2019		2020		2019
Balance at January 1,	$	(44,732)	$	(44,460)	$	(133)	$	(174)	$	(44,865)	$	(44,634)
Other comprehensive (loss) income		(42)		(6)		(6)		152		(48)		146
Total before tax		(44,774)		(44,466)		(139)		(22)		(44,913)		(44,488)
Tax effect		—		—		—		—		—		—
Balance at June 30,	$	(44,774)	$	(44,466)	$	(139)	$	(22)	$	(44,913)	$	(44,488)

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Share-Based Compensation (Tables)

6 Months Ended

Jun. 30, 2020

Share-Based Compensation

Share-Based Compensation Expense Recognized in Accompanying Statements of Operations

Share-based compensation expense for all equity-based programs, including stock options, restricted stock units and the employee stock purchase plan, for the three and six months ended June 30, 2020 and 2019 was recognized in the accompanying Consolidated Statements of Operations and Comprehensive Loss as follows (in thousands):

	Three months ended June 30,				Six months ended June 30,
	2020		2019		2020		2019
Research and development	$	6,636	$	6,633	$	13,561	$	13,244
Selling, general and administrative		6,677		7,497		12,713		14,525
Total share-based compensation expense	$	13,313	$	14,130	$	26,274	$	27,769

Summary of Stock Options Activity

				Weighted
		Weighted		Average	Aggregate
		Average		Remaining	Intrinsic
	Number of	Exercise		Contractual	Value
	Options	Price		Term (Years)	(Thousands)
Outstanding at December 31, 2019	6,287,025	$	42.24
Granted	870,492		7.61
Exercised	(24,153)		3.08
Forfeited	(346,100)		48.18
Outstanding at June 30, 2020	6,787,264	$	37.63	6.1	$	851
Vested and expected to vest at June 30, 2020	6,606,555	$	38.12	6.0	$	806
Vested and exercisable at June 30, 2020	4,912,792	$	44.14	5.0	$	350

Schedule of Share-Based Compensation Arrangements by Share-Based Payment Award

The following table summarizes information about our stock options as of and for the three and six months ended June 30, 2020 and 2019 (in thousands, except per share amounts):

	Three months ended June 30,				Six months ended June 30,
	2020		2019		2020		2019
Weighted-average grant date fair value per share	$	5.06	$	11.33	$	5.87	$	15.81
Intrinsic value of options exercised	$	87	$	198	$	91	$	963
Cash received from stock option exercises	$	72	$	222	$	74	$	1,316

Summary of activity related to our unvested RSUs

		Weighted
		Average
	Number of	Grant Date
	Units	Fair Value
Unvested at December 31, 2019	2,171,347	$	28.37
Granted	2,392,428		8.27
Vested	(775,784)		28.10
Forfeited	(276,398)		19.18
Unvested at June 30, 2020	3,511,593	$	15.46
Expected to vest after June 30, 2020	(3,351,795)	$	14.97

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Net Loss Per Common Share (Tables)

6 Months Ended

Jun. 30, 2020

Net Loss Per Common Share

Shares Outstanding Excluded from Calculation of Diluted Net Loss Per Share

The shares outstanding at the end of the respective periods presented in the table below were excluded from the calculation of diluted net loss per share due to their anti-dilutive effect (in thousands):

	Three and six months ended June 30,
	2020	2019
Common shares under option plans	4,156	3,133
Convertible senior notes	25,648	8,584
Total potential dilutive shares	29,804	11,717

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Nature of Business and Basis of Presentation (Details)	6 Months Ended
	Jun. 30, 2020 segment item product
Number of operating segments | segment	1
Number of other product candidates | product	2
Minimum estimated number of months operating plan funded	12 months
Minimum
Number of chemotherapies received by an adult patient	2
Number of prior lines of platinum based chemotherapy received by patient	2

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Summary of Significant Accounting Policies (Details) - USD ($) $ in Thousands		6 Months Ended
	Jan. 01, 2020	Jun. 30, 2020
Summary of Significant Accounting Policies
Amortization period of the asset		true
Payment terms number of days		30 days
Shelf life of inventory		4 years
Consumption period of API		6 years
Shelf-life of API		4 years
Cash, Cash Equivalents and Available-for-Sale Securities
Impairment for available for debt securities	$ 0	$ 0
Rucaparib
Summary of Significant Accounting Policies
Shelf life of inventory		4 years

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Financial Instruments and Fair Value Measurements (Details) - Recurring - USD ($) $ in Thousands	Jun. 30, 2020	Dec. 31, 2019
Fair Value Measurements
Assets at fair value	$ 147,902	$ 251,618
Money market
Fair Value Measurements
Assets at fair value	147,902	61,882
U.S. treasury securities
Fair Value Measurements
Assets at fair value		189,736
Fair Value, Inputs, Level 1
Fair Value Measurements
Assets at fair value	147,902	116,792
Fair Value, Inputs, Level 1 | Money market
Fair Value Measurements
Assets at fair value	147,902	61,882
Fair Value, Inputs, Level 1 | U.S. treasury securities
Fair Value Measurements
Assets at fair value		54,910
Fair Value, Inputs, Level 2
Fair Value Measurements
Assets at fair value		134,826
Fair Value, Inputs, Level 2 | Money market
Fair Value Measurements
Assets at fair value	0	0
Fair Value, Inputs, Level 2 | U.S. treasury securities
Fair Value Measurements
Assets at fair value		134,826
Fair Value, Inputs, Level 3
Fair Value Measurements
Assets at fair value	0	0
Fair Value, Inputs, Level 3 | Money market
Fair Value Measurements
Assets at fair value	0	0
Fair Value, Inputs, Level 3 | U.S. treasury securities
Fair Value Measurements
Assets at fair value	$ 0	$ 0

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Financial Instruments and Fair Value Measurements - Additional Information (Details) - USD ($) $ in Thousands	3 Months Ended	6 Months Ended
	Jun. 30, 2020	Jun. 30, 2020	Dec. 31, 2019
Fair Value Measurements
Liabilities at fair value	$ 0	$ 0
Transfers between level 1 and level 2, assets	0	0
Transfers between level 2 and level 1, assets	0	0
Transfers between level 1 and level 2, liabilities	0	0
Transfers between level 2 and level 1, liabilities	0	0
Transfer of assets into level 3	0	0
Transfer of assets out of level 3	0	0
Transfer of liabilities into level 3	0	0
Transfer of liabilities out of level 3	0	0
Convertible senior notes	504,680	504,680	$ 644,751
Convertible Senior Unsecured Notes 2021 Notes
Fair Value Measurements
Convertible senior notes	64,000	64,000
Convertible Senior Unsecured Notes 2021 Notes | Fair Value, Inputs, Level 2
Fair Value Measurements
Convertible senior notes, fair value	58,200	58,200
Convertible Senior Unsecured Notes 2024 Notes
Fair Value Measurements
Convertible senior notes	147,000	147,000
Convertible senior notes, fair value	152,800	152,800
Convertible Senior Unsecured Notes 2025 Notes
Fair Value Measurements
Convertible senior notes	293,600	293,600
Convertible senior notes, fair value	$ 180,800	$ 180,800

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Available-for-Sale Securities (Details) - U.S. treasury securities $ in Thousands	Dec. 31, 2019 USD ($)
Available-for-Sale Securities
Amortized Cost	$ 134,826
Gross Unrealized Gains	0
Aggregate Fair Value	$ 134,826

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Inventories (Details) - USD ($) $ in Thousands	Jun. 30, 2020	Dec. 31, 2019
Inventories
Work-in-process	$ 103,871	$ 104,139
Finished goods, net	29,317	20,433
Total inventories	133,188	124,572
Inventories, net	26,851	26,519
Long-term inventory	$ 106,337	$ 98,053

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Other Current Assets (Details) - USD ($) $ in Thousands	Jun. 30, 2020	Dec. 31, 2019
Other Current Assets
Prepaid insurance	$ 1,913	$ 505
Prepaid IT	796	698
Prepaid expenses - other	4,235	3,371
Value-added tax ("VAT") receivable	6,364	11,920
Receivable - other	1,111	2,176
Other	96	177
Total	$ 14,515	$ 18,847

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Intangible Assets and Goodwill (Details) - Licensing Agreements - USD ($) $ in Thousands	Jun. 30, 2020	Dec. 31, 2019
Finite Lived Intangible Assets [Line Items]
Intangible asset - milestones	$ 79,850	$ 71,850
Accumulated amortization	(11,422)	(8,930)
Total intangible asset, net	$ 68,428	$ 62,920

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Intangible Assets and Goodwill - Additional Information (Details) - USD ($) $ in Millions	1 Months Ended	3 Months Ended		6 Months Ended
	May 31, 2020	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
Finite Lived Intangible Assets
Amortization of Intangible Assets			$ 1.2		$ 2.3
Licensing Agreements
Finite Lived Intangible Assets
Milestone payment related to FDA approval	$ 8.0
Amortization of Intangible Assets		$ 1.3		$ 2.5

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Intangible Assets - Estimated Future Amortization (Details) - Licensing Agreements - USD ($) $ in Thousands	Jun. 30, 2020	Dec. 31, 2019
Finite Lived Intangible Assets
2020 (remaining six months)	$ 2,686
2021	5,371
2022	5,371
2023	5,371
2024	5,371
Thereafter	44,258
Total intangible asset, net	$ 68,428	$ 62,920

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Other Accrued Expenses (Details) - USD ($) $ in Thousands	Jun. 30, 2020	Dec. 31, 2019
Other Accrued Expenses
Accrued personnel costs	$ 12,101	$ 16,915
Accrued interest payable for convertible senior notes	3,900	5,903
Income tax payable	871	3,505
Accrued corporate legal fees and professional services	920	310
Accrued royalties	6,082	6,038
Accrued variable considerations	8,303	5,748
Purchase of API received not yet invoiced	79
Accrued expenses - other	5,426	3,809
Total	$ 37,682	$ 42,228

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Lease (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
Lessee Disclosure [Abstract]
Amortization of right-of-use assets	$ 474	$ 356	$ 947	$ 712
Interest on lease liabilities	208	179	423	363
Operating lease cost	998	994	2,124	2,144
Short-term lease cost	116	48	222	97
Variable lease cost	472	645	1,070	1,369
Total lease cost	2,268	2,222	4,786	4,685
Cash flows from leases
Operating cash flows from finance leases	208	179	423	363
Operating cash flows from operating leases	998	994	2,124	2,144
Financing cash flows from finance leases	$ 364	$ 255	$ 720	$ 505

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Lease - Weighted Average (Details)	Jun. 30, 2020	Jun. 30, 2019
Weighted-average remaining lease term (years)
Operating leases	7 years	6 years 9 months 18 days
Finance leases	5 years 6 months	6 years 6 months
Weighted-average discount rate
Operating leases	8.00%	8.00%
Finance leases	8.00%	8.00%

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Lease - Future minimum commitments (Details) $ in Thousands	Jun. 30, 2020 USD ($)
Operating Leases
2020 (remaining six months)	$ 2,814
2021	5,628
2022	5,177
2023	4,791
2024	4,798
Thereafter	14,619
Present value adjustment	(9,162)
Present value of lease payments	$ 28,665
Operating Lease, Liability, Statement of Financial Position [Extensible List]	us-gaap:OtherLiabilitiesCurrent us-gaap:OtherLiabilitiesNoncurrent
Finance Leases
2020 (remaining six months)	$ 1,143
2021	2,287
2022	2,287
2023	2,287
2024	2,287
Thereafter	2,287
Present value of adjustment	(2,429)
Present value of lease payments	10,149
Total
2020 (remaining six months)	3,957
2021	7,915
2022	7,464
2023	7,078
2024	7,085
Thereafter	16,906
Present value adjustment	(11,591)
Present value of lease payments	$ 38,814

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Long-term Debt (Details) $ / shares in Units, $ in Thousands						1 Months Ended	2 Months Ended	3 Months Ended	6 Months Ended
	May 02, 2022 D	Aug. 13, 2019 USD ($) $ / shares	May 01, 2019 USD ($) country site item	Apr. 16, 2018 USD ($) $ / shares	Sep. 09, 2014 USD ($) D item $ / shares	Apr. 30, 2020 USD ($)	May 31, 2020 USD ($) shares	Jun. 30, 2020 USD ($)	Jun. 30, 2020 USD ($)	Dec. 31, 2019 USD ($)
Debt Instrument
Aggregate principal amount								$ 515,042	$ 515,042
Gain (loss) on extinguishment of debt								(3,277)	(3,277)
2019
Debt Instrument
Repayments of Debt									35,000
2020
Debt Instrument
Repayments of Debt									$ 50,000
Date is prior to Repayment Start Date
Debt Instrument
Debt Instrument Ratio of borrowed amount									1.75%
Date is after Repayment Start Date
Debt Instrument
Debt Instrument Ratio of borrowed amount									2.00%
TPG Sixth Street Partners, LLC
Debt Instrument
Principal amount outstanding								72,500	$ 72,500
Debt issuance costs								1,800	1,800
Unamortized debt issuance costs								$ 1,600	$ 1,600
Number of patients | item			1,000
Number of countries | country			25
Effective interest rate								14.50%	14.50%
Debt, Weighted Average Interest Rate			9.75%					10.25%	10.25%
Maximum Amount to be Repaid Under Borrowing Agreement			$ 166,500
Percentage of royalty payment received			19.50%
Percentage of other amounts received			19.50%
Quarterly payments based on a certain percentage of revenues									$ 8,500
Quarterly payments with label portion expanded by FDA									13,500
Aggregate borrowed amount			$ 166,500
Ratio of repayment amount			2
TPG Sixth Street Partners, LLC | Minimum
Debt Instrument
Number of sites | site			270
TPG Sixth Street Partners, LLC | Maximum
Debt Instrument
Aggregate principal amount			$ 175,000
Maximum Amount to be Repaid Under Borrowing Agreement			350,000
Aggregate borrowed amount			$ 350,000
Convertible Senior Unsecured Notes
Debt Instrument
Unamortized debt issuance costs								$ 10,400	$ 10,400	$ 15,400
2021 Notes
Debt Instrument
Convertible senior notes, interest rate					2.50%			2.50%	2.50%
Aggregate principal amount					$ 287,500	$ 32,800		$ 64,418	$ 64,418
Convertible senior notes, maturity date					Sep. 15, 2021				Sep. 15, 2021
Net proceeds from convertible senior notes					$ 278,300
Common stock initial conversion rate per $1,000 in principal amount					16.1616
Convertible senior notes, initial conversion price per share | $ / shares					$ 61.88
Debt instrument, redemption period start date					Sep. 15, 2018
Last reported sale price of common stock as a percent of conversion price					150.00%
Debt instrument, conversion in effect for number of trading days | D					20
Debt instrument conversion, consecutive trading day period | D					30
Debt instrument, trading days preceding redemption notice, maximum | item					2
Debt instrument redemption price percentage to principal amount					100.00%
Debt instrument repurchase percentage					100.00%
Principal amount outstanding		$ 190,300
Aggregate repurchase price including accrued interest		171,800
Gain (loss) on extinguishment of debt		18,500				(3,300)
Debt issuance costs					$ 9,200
Unamortized debt issuance costs derecognized		$ 2,000
Debt instrument term					7 years
2021 Notes | Semi Annual Payment, First payment date
Debt Instrument
Interest payment date on senior notes					--03-15
2021 Notes | Semi Annual Payment, Second payment date
Debt Instrument
Interest payment date on senior notes					--09-15
2024 Notes
Debt Instrument
Convertible senior notes, interest rate		4.50%						4.50%	4.50%
Aggregate principal amount		$ 263,000				$ 36,100	$ 24,300	$ 150,624	$ 150,624
Convertible senior notes, maturity date									Aug. 01, 2024
Net proceeds from convertible senior notes		$ 254,900
Common stock initial conversion rate per $1,000 in principal amount		137.2213					137.2213
Convertible senior notes, initial conversion price per share | $ / shares		$ 7.29
Debt instrument repurchase percentage		100.00%
Debt issuance costs		$ 8,000
Debt instrument term		5 years
Debt conversion to number of shares of common stock | shares							3,331,870
2024 Notes | Semi Annual Payment, First payment date
Debt Instrument
Interest payment date on senior notes		--02-01
2024 Notes | Semi Annual Payment, Second payment date
Debt Instrument
Interest payment date on senior notes		--08-01
2025 Notes
Debt Instrument
Convertible senior notes, interest rate				1.25%				1.25%	1.25%
Aggregate principal amount				$ 300,000				$ 300,000	$ 300,000
Convertible senior notes, maturity date									May 01, 2025
Net proceeds from convertible senior notes				$ 290,900
Common stock initial conversion rate per $1,000 in principal amount				13.1278
Convertible senior notes, initial conversion price per share | $ / shares				$ 76.17
Debt instrument repurchase percentage				100.00%
Debt issuance costs				$ 9,100
Debt instrument term				7 years
2025 Notes | Semi Annual Payment, First payment date
Debt Instrument
Interest payment date on senior notes				--05-01
2025 Notes | Semi Annual Payment, Second payment date
Debt Instrument
Interest payment date on senior notes				--11-01
Borrowing Exceeds $166.5 million | TPG Sixth Street Partners, LLC | Minimum
Debt Instrument
Quarterly payments based on a certain percentage of revenues									$ 8,940
Borrowing Exceeds $166.5 million | TPG Sixth Street Partners, LLC | Maximum
Debt Instrument
Quarterly payments with label portion expanded by FDA									$ 14,190
Scenario, Actual | 2025 Notes
Debt Instrument
Last reported sale price of common stock as a percent of conversion price	150.00%
Debt instrument, conversion in effect for number of trading days | D	20
Debt instrument conversion, consecutive trading day period | D	30
Debt instrument, trading days preceding redemption notice, maximum | D	2
Debt instrument redemption price percentage to principal amount	100.00%

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Long-term Debt - Convertible senior notes (Details) - USD ($) $ / shares in Units, $ in Thousands	1 Months Ended	3 Months Ended	6 Months Ended
	Jan. 31, 2020	Jun. 30, 2020	Jun. 30, 2020	Dec. 31, 2019
Debt Instrument [Line Items]
Loss on extinguishment of debt		$ 3,277	$ 3,277
Convertible Senior Unsecured Notes
Debt Instrument [Line Items]
Unamortized debt issuance costs		$ 10,400	$ 10,400	$ 15,400
2024 Notes | Direct registered offering
Debt Instrument [Line Items]
Shares issued	17,777,679
Share Price	$ 9.25
Principal amount of debt repurchase	$ 123,400
Unamortized debt issuance costs	3,600
Loss on extinguishment of debt	$ 7,800

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Long-term Debt - Interest expense recognized (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
Long-term Debt
Interest on convertible notes	$ 2,811	$ 2,734	$ 5,994	$ 5,469
Amortization of debt issuance costs	637	679	1,423	1,324
Debt issuance cost derecognized related to convertible debt transactions	789		4,344
Interest on finance lease	208	179	423	363
Interest on borrowings under financing agreement	2,264	199	4,055	199
Other interest	30	26	61	52
Total interest expense	$ 6,739	$ 3,817	$ 16,300	$ 7,407

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Stockholders' Equity (Details) $ / shares in Units, $ in Thousands	1 Months Ended	6 Months Ended
	May 31, 2020 USD ($) $ / shares shares	Jun. 30, 2020 USD ($) Vote shares	Dec. 31, 2019 shares
Stockholders' Equity
Common shares issued in a public offering | shares	11,090,000	88,196,705	54,956,341
Price per share in a public offering | $ / shares	$ 8.05
Proceeds from offering | $	$ 82,800	$ 246,727
Number Of Vote Per Common Stock | Vote		1

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Stockholders' Equity - Additional Information (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
Accumulated Other Comprehensive Loss
Beginning balance	$ (44,890)	$ (44,564)	$ (44,865)	$ (44,634)
Other comprehensive (loss) income	(23)	76	(48)	146
Total before tax	(44,913)	(44,488)	(44,913)	(44,488)
Tax effect	0	0
Ending balance	(44,913)	(44,488)	(44,913)	(44,488)
Reclassifications out of accumulated other comprehensive loss	0	0	0	0
Foreign Currency Translation Adjustments
Accumulated Other Comprehensive Loss
Beginning balance	(44,835)	(44,465)	(44,732)	(44,460)
Other comprehensive (loss) income	61	(1)	(42)	(6)
Total before tax	(44,774)	(44,466)	(44,774)	(44,466)
Tax effect	0	0
Ending balance	(44,774)	(44,466)	(44,774)	(44,466)
Unrealized (Losses) Gains
Accumulated Other Comprehensive Loss
Beginning balance	(55)	(99)	(133)	(174)
Other comprehensive (loss) income	(84)	77	(6)	152
Total before tax	(139)	(22)	(139)	(22)
Tax effect	0	0
Ending balance	$ (139)	$ (22)	$ (139)	$ (22)

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Share-Based Compensation - Share-Based Compensation Expense (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
Share-Based Compensation Expense Recognized in Accompanying Statements of Operations
Total Share-based compensation expense	$ 13,313	$ 14,130	$ 26,274	$ 27,769
Research and development
Share-Based Compensation Expense Recognized in Accompanying Statements of Operations
Total Share-based compensation expense	6,636	6,633	13,561	13,244
Selling, general and administrative
Share-Based Compensation Expense Recognized in Accompanying Statements of Operations
Total Share-based compensation expense	$ 6,677	$ 7,497	$ 12,713	$ 14,525

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Share-Based Compensation (Details) - USD ($) $ / shares in Units, $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
Share Based Compensation Arrangement By Share Based Payment Award
Share-based compensation expense, tax benefit recognized	$ 0.0	$ 0.0	$ 0.0	$ 0.0
Closing Stock Price	$ 6.75		$ 6.75
Common shares under option plans
Share Based Compensation Arrangement By Share Based Payment Award
Unrecognized stock-based compensation expense related to unvested stock options	$ 28.2		$ 28.2
Unrecognized stock-based compensation expense related to non-vested options and/or RSUs, weighted-average remaining vesting period			1 year 9 months 18 days
Restricted Stock Units (RSUs)
Share Based Compensation Arrangement By Share Based Payment Award
Unrecognized stock-based compensation expense related to unvested RSUs	$ 49.1		$ 49.1
Unrecognized stock-based compensation expense related to non-vested options and/or RSUs, weighted-average remaining vesting period			2 years 3 months 18 days

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Share-Based Compensation - Summary of Stock Options Activity (Details) - USD ($) $ / shares in Units, $ in Thousands	6 Months Ended
	Jun. 30, 2020
Share-Based Compensation
Beginning Balance, Number of Options Outstanding	6,287,025
Number of Options, Granted	870,492
Number of Options, Exercised	(24,153)
Number of Options, Forfeited	(346,100)
Ending Balance, Number of Options Outstanding	6,787,264
Vested and expected to vest at June 30, 2020	6,606,555
Vested and exercisable at June 30, 2020	4,912,792
Beginning Balance, Weighted Average Exercise Price	$ 42.24
Granted, Weighted Average Exercise Price	7.61
Exercised, Weighted Average Exercise Price	3.08
Forfeited, Weighted Average Exercise Price	48.18
Ending Balance, Weighted Average Exercise Price	37.63
Vested and expected to vest, Weighted Average Exercise Price	38.12
Vested and exercisable, Weighted Average Exercise Price	$ 44.14
Outstanding, Weighted Average Remaining Contractual Term (Years)	6 years 1 month 6 days
Vested and expected to vest, Weighted Average Remaining Contractual Term (Years)	6 years
Exercisable, Weighted Average Remaining Contractual Term (Years)	5 years
Outstanding, Aggregate Intrinsic Value	$ 851
Vested and expected to vest, Aggregate Intrinsic Value	806
Vested and exercisable, Aggregate Intrinsic Value	$ 350

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Share-Based Compensation - Schedule of Share-Based Compensation Arrangements by Share-Based Payment Award (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
Share-Based Compensation
Weighted-average grant date fair value per share	$ 5.06	$ 11.33	$ 5.87	$ 15.81
Intrinsic value of options exercised	$ 87	$ 198	$ 91	$ 963
Cash received from stock option exercises	$ 72	$ 222	$ 74	$ 1,316

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Share-Based Compensation - Additional Information (Details) - Restricted Stock Units (RSUs)	6 Months Ended
	Jun. 30, 2020 $ / shares shares
Share Based Compensation Arrangement By Share Based Payment Award
Unvested as of Beginning Balance | shares	2,171,347
Number of Units, Granted | shares	2,392,428
Number of Units, Vested | shares	(775,784)
Number of Units, Forfeited | shares	(276,398)
Outstanding as of Ending Balance | shares	3,511,593
Expected to vest after June 30, 2020 | shares	(3,351,795)
Weighted Average Grant Date Fair Value, Beginning Balance | $ / shares	$ 28.37
Weighted Average Grant Date Fair Value, Granted | $ / shares	8.27
Weighted Average Grant Date Fair Value, Vested | $ / shares	28.10
Weighted Average Grant Date Fair Value, Forfeited | $ / shares	19.18
Weighted Average Grant Date Fair Value, Ending Balance | $ / shares	15.46
Weighted Average Grant Date Fair Value, Expected to vest after March 31, 2020 | $ / shares	$ 14.97

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License Agreements (Details) $ in Thousands				1 Months Ended										3 Months Ended	6 Months Ended	12 Months Ended
	Dec. 19, 2016 USD ($)	Aug. 30, 2016	Nov. 19, 2013 USD ($)	Jun. 30, 2020 USD ($)	May 31, 2020 USD ($)	Feb. 29, 2020 item	Sep. 30, 2019 USD ($)	Jun. 30, 2019 USD ($)	Feb. 28, 2019 USD ($)	Jun. 30, 2018 USD ($)	Apr. 30, 2018 USD ($)	Jun. 30, 2011 USD ($)	Oct. 31, 2008	Mar. 31, 2017 USD ($)	Jun. 30, 2020 USD ($)	Dec. 31, 2019 USD ($)
Rucaparib
License Agreements
Milestone payments								$ 750
Rucaparib | EMA [Member]
License Agreements
Milestone payment obligation									$ 15,000	$ 20,000
Rucaparib | First approval of NDA by FDA
License Agreements
Milestone payment obligation											$ 15,000
Rucaparib | Third approval of Rubraca as monotherapy treatment
License Agreements
Milestone payments				$ 8,000
Milestone payment obligation					$ 8,000
3B Pharmaceuticals
License Agreements
Percentage of Non-Royalty Consideration Payable on Sublicense Agreements															34.00%
License Agreements Licensor Pfizer | Rucaparib
License Agreements
Milestone payments										$ 23,000				$ 750
Milestone payment obligation	$ 750
Milestone payment incurred as a result of government approval	20,000
Deferred milestone payment	$ 23,000
Maximum number of months after FDA approval	18 months	18 months
License Agreements Licensor Pfizer | Rucaparib | Minimum
License Agreements
Annual sales target for sales milestone payments															$ 250,000
License Agreements Licensor Pfizer | Rucaparib | Maximum
License Agreements
Maximum potential future development, regulatory milestone payments															8,000
Additional maximum payments payable on attaining the sales target				$ 170,000											$ 170,000
License Agreement Terms | 3B Pharmaceuticals
License Agreements
Acquired in-process research and development							$ 9,400
Number of additional undisclosed targets | item						3
Research and development expense																$ 2,100
Percentage Of Royalty On Net Sales															6.00%
License Agreement Terms | License Agreements Licensor Pfizer | Rucaparib
License Agreements
Upfront payment												$ 7,000
Milestones paid to Pfizer prior to FDA approval												$ 1,400
License Agreement Terms | Advenchen Laboratories LLC | License Agreements Lucitanib
License Agreements
Milestone payment obligation			$ 65,000
Percentage of Non-Royalty Consideration Payable on Sublicense Agreements													25.00%

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Net Loss Per Common Share (Details) - shares shares in Thousands	6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019
Antidilutive Securities Excluded From Computation Of Earnings Per Share
Total potential dilutive shares	29,804	11,717
Common shares under option plans
Antidilutive Securities Excluded From Computation Of Earnings Per Share
Total potential dilutive shares	4,156	3,133
Convertible senior notes
Antidilutive Securities Excluded From Computation Of Earnings Per Share
Total potential dilutive shares	25,648	8,584

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Commitments and Contingencies (Details) $ in Millions			1 Months Ended	6 Months Ended
	Nov. 10, 2019 plaintiff	Jun. 20, 2017 plaintiff patent	Mar. 31, 2017 shareholder	Jun. 30, 2020 USD ($)
Commitments and Contingencies
Purchase commitments | $				$ 74.5
Number of putative shareholders | shareholder			2
Number of patents in salt and polymorph patent family | patent		2
Number of opponents | plaintiff	1	2
Number of years regulatory exclusivity in Europe				10 years
Number of years possible additional regulatory exclusivity				1 year