Shares of Clovis Oncology (CLVS) are on the rise after the U.S. Food and Drug Administration granted accelerated approval to its rucaparib drug in advanced ovarian cancer, surprising the market, which was not expecting an announcement until February. While acknowledging that this early approval gives Clovis the chance to build sales of its product ahead of competitors, some Wall Street analysts still believe the company and its competitors will eventually split the market.

ACCELERATED APPROVAL: Clovis announced earlier today that the FDA has approved Rubraca tablets as monotherapy for the treatment of patients with deleterious BRCA mutation associated advanced ovarian cancer, who have been treated with two or more chemotherapies, and selected for therapy based on an FDA-approved companion diagnostic for Rubraca. The drug's indication is approved under the FDA's accelerated approval program.

BROAD LABEL 'GOOD': After the news, Stifel analyst Thomas Shrader raised his price target for Clovis to $52 from $45. The analyst told investors that he views the approved label as "broad," calling it a "modest positive" based on the possibility Rubraca could have been approved for only Pt-sensitive patients. Nonetheless, Shrader noted that this approval gives Clovis the chance to build a market in this space before the approval of Tesaro's (TSRO) niraparib, a drug he expects to show similar efficacy to rucaparib, but potentially worse toxicity. The analyst said he expects Clovis' rucaparib and Tesaro's niraparib to eventually split the PARP market as he believes both drugs look more effective than olaparib, marketed by AstraZeneca (AZN) as Lynparza. Overall, Shrader expects Clovis rucaparib to be a "successful drug" in ovarian cancer and, based on its broad target specificity, believes the drug has the highest chance of being sequenced. The analyst reiterated a Buy rating on Clovis' shares.

IMPROVED MARKET OPPORTUNITY: In a research note of his own, Piper Jaffray analyst Steven Breazzano told investors that he believes the approved label reads "favorably," noting that it does not appear to include anything particularly concerning around monitoring or side effects. With an early approval and a broader label than AstraZeneca's Lynparza, Clovis now has an "improved opportunity" to establish a larger foothold ahead of competitive entrants in the maintenance setting, he argued. Nonetheless, the analyst noted that both Tesaro's niraparib and AstraZeneca's lynparza are positioned to enter the maintenance setting ahead of Clovis' own ARIEL3 data later next year. While Breazzano is optimistic for a positive result in the latter's maintenance trial, ultimately how the dynamic between maintenance and treatment evolves as well as differentiation between the various profiles remains to be seen. The analyst reiterated a Neutral rating and $40 price target on Clovis' shares.

MAINTENANCE SETTING: Janney Capital analyst Debjit Chattopadhyay also raised his price target for Clovis to $38 from $34 following FDA approval of its rucaparib. The analyst noted that no restrictions were placed based on platinum sensitivity, which is a "strong positive," though he added that he sees the third-line treatment segment to be at risk from the expansion of multiple PARP's as maintenance therapy. The readout from the ARIEL3 in the maintenance setting will be "the most important clinical event" for Clovis, but it is not expected until the second half of 2017, he noted, adding that he believes Clovis is likely to need additional capital over the near-term. Chattopadhyay reiterated a Neutral rating on Clovis' shares.

PRICE ACTION: After being halted earlier, shares of Clovis have gained over 10% to $41.08 in afternoon trading. Meanwhile, Tesaro's stock has dropped about 3.3% to $127.10 per share.