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.

Commitments and Contingencies

6 Months Ended

Jun. 30, 2020

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.