Commitments and Contingencies	6 Months Ended
Jun. 30, 2022
Commitments and Contingencies
Commitments and Contingencies	14. Commitments and Contingencies Royalty and License Fee Commitments We have entered into certain license agreements, as identified in Note 12, 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 has constructed, in its existing facility, a production train that will manufacture the Rubraca active ingredient. We made scheduled capital program fee payments toward capital equipment and other costs associated with the construction of the production train. Beginning in the fourth quarter of 2018, once the facility was operational, we were 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, 2022, $35.1 million of purchase commitments remain 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, financial lease of equipment, purchase of leasehold improvements and prepaid 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. On June 16, 2021, we entered into amendment no. 2 of the Agreement with Lonza (“Amendment 2”). Pursuant to the terms of Amendment 2, we paid Lonza $1.1 million to repurpose the production train so that Lonza will be able to use the facility to manufacture other products for third parties in addition to API for Clovis. Lonza is guaranteeing a minimum percentage usage of this production train for third parties and Lonza would reduce our fixed facility fee starting in 2023 based on this minimum percentage usage. If Lonza is able to utilize greater than the minimum guaranteed percentage, it will increase the reduction to our fixed facility fee. We evaluated Amendment 2 and determined that we no longer have a lease with Lonza at June 30, 2021 because Amendment 2 modified the terms of the Agreement in that Lonza will use a portion of the production train for third parties. The Agreement no longer conveys the right to direct the use of the identified asset and Clovis no longer has the right to obtain substantially all the economic benefit from the asset. As a result, the arrangement is no longer in scope of ASC 842, “Leases”, resulting in the derecognition of the lease components recognized under the original agreement. This includes the operating lease liabilities and ROU assets, finance lease liabilities and ROU assets and leasehold improvement assets and liability. 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 In March 2017, two putative shareholders of the Company, Macalinao and McKenry (“ 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”). Following denial, in part, of the Defendants’ motion to dismiss, on December 22, 2019, the Company’s Board of Directors formed a Special Litigation Committee (the “SLC”) to conduct an independent investigation of the claims asserted in the Consolidated Derivative Action. On March 4, 2022, following the completion of the SLC investigation, certain discovery, and mediation among the parties, the Plaintiffs, the Company and the SLC executed a stipulation and agreement of settlement to fully resolve the Consolidated Derivative Action without admitting any liability. As part of the settlement, the Company agreed to adopt certain corporate governance reforms, including, among other things, the election of one new independent director to the Clovis Board of Directors by the 2023 Annual Meeting of Stockholders and the creation of a management-level Disclosure Committee. Neither the Company nor any of the defendants were required to make a financial contribution towards the principal terms of the settlement. Moreover, the Company agreed not to oppose or object to Plaintiffs’ application for an award of attorneys’ fees and expenses not to exceed $2.325 million in the aggregate, which amount, as ultimately awarded by the Court, was paid by the Company during the second quarter of 2022. On May 4, 2022, after a final hearing, the Delaware Chancery Court entered an order and final judgment approving the settlement. The judgment found that notice to the Company’s stockholders was adequate and sufficient, determined that the settlement was fair, reasonable and adequate in all respects, and released claims on behalf of the Company’s stockholders that were brought or could have been brought in the Consolidated Derivative Action and forever barred and enjoined them from prosecuting such claims. European Patent Opposition Two European patents in the rucaparib camsylate salt/polymorph patent family (European Patent 2534153 and its divisional European Patent 3150610) were opposed. In particular, opposition notices against European Patent 2534153 were filed by two parties on June 20, 2017. During an oral hearing that took place on December 4, 2018, the European Patent Office’s Opposition Division maintained European Patent 2534153 in amended and narrowed form with claims 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 AG, appealed the written decision of the European Opposition Division and filed reply appeal briefs in November 2019. An oral hearing in the appeal is scheduled for March 30, 2023. The Board of Appeal issued its preliminary opinion on July 25, 2022. The preliminary opinion is publicly available and non-binding, and identifies points for consideration at the oral hearing, including novelty and inventive step, but does not establish definitive positions on these points. An opposition against European Patent 3150610 was filed by Generics (UK) Limited on April 30, 2020 on grounds similar to those raised in the opposition notices against European Patent 2534153, which grounds are common in such proceedings. Clovis responded to the opposition notice in European Patent 3150610 by amending the claims to be directed to the use of rucaparib maleate in a method of inhibiting PARP activity or treating cancer. That is, the amended claims do not cover Rubraca. During an oral hearing that took place on November 18, 2021, European Patent 3150610 was revoked and the written decision of the European Patent Office was dated December 15, 2021. Clovis filed its appeal on April 20, 2022. During the appeal, the effect of the Opposition Division’s decision is suspended, and the patent remains in force until a Technical Board of Appeals issues its own decision. In Europe, regulatory exclusivity is available for ten years, plus one year for a new indication; therefore, we have regulatory exclusivity for Rubraca, including all forms of rucaparib, in Europe until 2028, and if the EMA approves a subsequent indication that brings significant clinical benefit in comparison with existing therapies, until 2029.

Commitments and Contingencies

6 Months Ended

Jun. 30, 2022

14. Commitments and Contingencies

Royalty and License Fee Commitments

We have entered into certain license agreements, as identified in Note 12, 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 has constructed, in its existing facility, a production train that will manufacture the Rubraca active ingredient. We made scheduled capital program fee payments toward capital equipment and other costs associated with the construction of the production train. Beginning in the fourth quarter of 2018, once the facility was operational, we were 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, 2022, $35.1 million of purchase commitments remain 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, financial lease of equipment, purchase of leasehold improvements and prepaid 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.

On June 16, 2021, we entered into amendment no. 2 of the Agreement with Lonza (“Amendment 2”). Pursuant to the terms of Amendment 2, we paid Lonza $1.1 million to repurpose the production train so that Lonza will be able to use the facility to manufacture other products for third parties in addition to API for Clovis. Lonza is guaranteeing a minimum percentage usage of this production train for third parties and Lonza would reduce our fixed facility fee

starting in 2023 based on this minimum percentage usage. If Lonza is able to utilize greater than the minimum guaranteed percentage, it will increase the reduction to our fixed facility fee. We evaluated Amendment 2 and determined that we no longer have a lease with Lonza at June 30, 2021 because Amendment 2 modified the terms of the Agreement in that Lonza will use a portion of the production train for third parties. The Agreement no longer conveys the right to direct the use of the identified asset and Clovis no longer has the right to obtain substantially all the economic benefit from the asset. As a result, the arrangement is no longer in scope of ASC 842, “Leases”, resulting in the derecognition of the lease components recognized under the original agreement. This includes the operating lease liabilities and ROU assets, finance lease liabilities and ROU assets and leasehold improvement assets and liability.

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

In March 2017, two putative shareholders of the Company, Macalinao and McKenry (“ 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”). Following denial, in part, of the Defendants’ motion to dismiss, on December 22, 2019, the Company’s Board of Directors formed a Special Litigation Committee (the “SLC”) to conduct an independent investigation of the claims asserted in the Consolidated Derivative Action.

On March 4, 2022, following the completion of the SLC investigation, certain discovery, and mediation among the parties, the Plaintiffs, the Company and the SLC executed a stipulation and agreement of settlement to fully resolve the Consolidated Derivative Action without admitting any liability. As part of the settlement, the Company agreed to adopt certain corporate governance reforms, including, among other things, the election of one new independent director to the Clovis Board of Directors by the 2023 Annual Meeting of Stockholders and the creation of a management-level Disclosure Committee. Neither the Company nor any of the defendants were required to make a financial contribution towards the principal terms of the settlement. Moreover, the Company agreed not to oppose or object to Plaintiffs’ application for an award of attorneys’ fees and expenses not to exceed $2.325 million in the aggregate, which amount, as ultimately awarded by the Court, was paid by the Company during the second quarter of 2022.

On May 4, 2022, after a final hearing, the Delaware Chancery Court entered an order and final judgment approving the settlement. The judgment found that notice to the Company’s stockholders was adequate and sufficient, determined that the settlement was fair, reasonable and adequate in all respects, and released claims on behalf of the Company’s stockholders that were brought or could have been brought in the Consolidated Derivative Action and forever barred and enjoined them from prosecuting such claims.

European Patent Opposition

Two European patents in the rucaparib camsylate salt/polymorph patent family (European Patent 2534153 and its divisional European Patent 3150610) were opposed. In particular, opposition notices against European Patent 2534153 were filed by two parties on June 20, 2017. During an oral hearing that took place on December 4, 2018, the European Patent Office’s Opposition Division maintained European Patent 2534153 in amended and narrowed form with claims 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 AG, appealed the written decision of the European Opposition Division and filed reply appeal briefs in November 2019. An oral hearing in the appeal is scheduled for March 30, 2023. The Board of Appeal issued its preliminary opinion on July 25, 2022. The preliminary opinion is publicly available and non-binding, and identifies points for consideration at the oral hearing, including novelty and inventive step, but does not establish definitive positions on these points.

An opposition against European Patent 3150610 was filed by Generics (UK) Limited on April 30, 2020 on grounds similar to those raised in the opposition notices against European Patent 2534153, which grounds are common

in such proceedings. Clovis responded to the opposition notice in European Patent 3150610 by amending the claims to be directed to the use of rucaparib maleate in a method of inhibiting PARP activity or treating cancer. That is, the amended claims do not cover Rubraca. During an oral hearing that took place on November 18, 2021, European Patent 3150610 was revoked and the written decision of the European Patent Office was dated December 15, 2021. Clovis filed its appeal on April 20, 2022. During the appeal, the effect of the Opposition Division’s decision is suspended, and the patent remains in force until a Technical Board of Appeals issues its own decision.

In Europe, regulatory exclusivity is available for ten years, plus one year for a new indication; therefore, we have regulatory exclusivity for Rubraca, including all forms of rucaparib, in Europe until 2028, and if the EMA approves a subsequent indication that brings significant clinical benefit in comparison with existing therapies, until 2029.