Spectrum Pharmaceuticals, Inc.
Q1 2022 Earnings Call Transcript

Published: 12 May 2022

[Operator:]

Thank you for standing by. And welcome to the Spectrum Pharmaceuticals First Quarter 2022 Earnings Conference Call. At this time, all participants are in listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. I would now like to hand the conference over to Mr. Michael Grabow, Senior Vice President of Corporate Strategy and Operations. Please go ahead.

[Michael Grabow:]

Thank you, operator. Good afternoon to everyone. Thank you for joining us today for Spectrum Pharmaceuticals first quarter 2022 financial results conference call. Our first quarter financial results press release was sent out earlier this afternoon and is available on our website at www.sppirx.com. Joining me on the call today from Spectrum Pharmaceuticals will be Tom Riga, President and CEO; and Dr. Francois Lebel, Chief Medical Officer. Before we get started, I would like to reference the notice regarding Forward-Looking Statements included in today’s press release. This notice emphasizes the major uncertainties and risks inherent in the forward-looking statements that we will make this afternoon. These statements are not guarantees of future performance and undue reliance should not be placed on them. Such forward-looking statements necessarily involve known and unknown risks and uncertainties, which may cause actual performance and financial results in future periods to differ materially from any projections of future performance or results expressed or implied by such forward-looking statements. With that, let me hand the call over to Tom Riga, CEO of Spectrum.

[Thomas Riga:]

Good afternoon and thank you for joining us on the call today. The year is off to a strong start as we anticipate FDA approvals later this year for our late stage assets Poziotinib and eflapegrastim, both are under active review with the agency. In the first quarter, we continued to make progress on our core business objectives, which are one, gaining FDA approvals and further advancing our two late stage assets. Two, streamlining our company and optimizing our cash burn and three, ensuring we are prepared to successfully launch both products. Let me provide some highlights starting with Poziotinib. Our NDA is under active review, and the agency has set a PDUFA date of November 24, 2022. With the initial indication for the treatment of patients with previously treated locally advanced or metastatic, non-small cell lung cancer harboring HER2 exon 20 insertion mutations. This product is a fast track designation, and there are currently no approved treatments for this indication. In the first quarter, we initiated a global confirmatory study in support of our application. This is an important and required step in the approval process. Additionally, we presented positive frontline data at the AACR meeting, which is our second successful cohort in their HER2 exon 20 insertion mutation space. Finally, we announced today that the FDA plans to host in ODAC meeting in connection with its review of the Poziotinib NDA. We are preparing for this advisory meeting and look forward to the opportunity to highlight the role that Poziotinib can play in addressing an important unmet medical need in the treatment of previously treated patients with HER2 exon 20 insertion mutations. The fall ODAC meeting is scheduled for September 22nd and 23rd. We will share the specific date and time for the Poziotinib discussion when it becomes available. Now, let me shift to eflapegrastim. In the quarter, the FDA accepted our resubmitted BLA and assigned a PDUFA date of September 9, 2022. This is a significant step forward in bringing this novel therapy to patients. We are actively working with our partner Hanmi to prepare for the upcoming pre-approval inspection of the drug substance facility. Furthermore, we have kicked off our commercial readiness efforts and our enthusiasm to enter this market remains high. Our commercial leadership infrastructure is in place and ready to engage key customers through purchasing organizations and third-party payers to ensure we optimize the launch trajectory, if approved. The long-acting G-CSF market remains a competitive yet substantial market and we are looking forward to the opportunity to compete. We will share our detailed commercial plans as we move closer to launch. Moving to our operations. We began the strategic restructure of the organization in January, and we continue to evaluate ways to optimize our cash burn and streamline our operations, while investing in our future success. The initial results of those efforts can be seen in our Q1 financials. We also strengthened our partnership with Hanmi Pharmaceutical. This included a $20 million equity investment by Hanmi and amendments to the licensing and supply agreements for both poziotinib and eflapegrastim. The amendments will allow us to maximize our near-term cash flows and provide improvements to our cost of goods. A strong partnership with Hanmi is critically important to Spectrum as our late stage essence stem from their research engine. The Spectrum Hanmi relationship and partnership dynamics have never been stronger than they are today. Welcome to Ms. Juhyun Lim to our Board of Directors in the first quarter. Ms. Lim currently serves as the President of Global Strategy and Planning in Hanmi Pharmaceutical. Juhyun has been an exceptional advocate for our partnership, and she is having an immediate impact on our board. Additionally, we announced last week that Ms. Brittany Bradrick has also joined our Board of Directors and will serve as our audit chair as of the second quarter. Ms. Bradrick is a seasoned executive with 25-years of experience in the life sciences sector, including M&A, investment banking, finance, strategy and corporate development. She currently serves as the chief financial officer at Neurelis. Just yesterday we announced the appointment of Ms. Nora Brennan as the new CFO and Spectrum. Nora has been on the Board of Directors and serving as the audit chair to the company. Her intimate knowledge of the company and familiarity with the team will allow her to hit the ground running in her new role. I’m thrilled to welcome Nora to our senior leadership team as she will officially join the company on May 25th. Given this, I would like to review our financials for the quarter. Total research and development expenses were 4.2 million for the first quarter of 2022 as compared to 19.4 million in the same period of 2021. The favorability is primarily related to the noncash reversal of an $11.2 million eflapegrastim drug substance accrual that was no longer payable to Hanmi Pharmaceuticals. SG&A expenses were 9.9 million in the quarter, compared to 14.3 million in the same period of 2021, driven by our recent restructuring. The net loss for the quarter was 15.4 million or $0.09 per share, compared to net loss of 35.7 million or $0.25 per share in the comparable period in 2021. On a non-GAAP basis, the net loss was 9.6 million or $0.06 per share, compared to a non-GAAP net loss of 29.4 million or $0.20 per share in the comparable period in 2021. We ended the first quarter with approximately 89.2 million in cash plus marketable securities, compared to 106.6 million at December 31 of 2021. As previously reported, we received a strategic equity investment from Hanmi in January of $20 million, which is included in the ending balance. Our operating cash burn was approximately 30.3 million as compared to 34.5 million in the prior period and was elevated due to onetime restructuring costs to cash combined with the restructuring announced in January will extend the Company’s runway into 2023. With that, I will now turn the call over to Dr. Lebel for a more detailed update on our political development progress.

[Francois Lebel:]

Good afternoon, everyone. I’m glad to be with you on today’s call and pleased to report on our latest achievements. The Poziotinib NDA is currently under active review at the FDA. This is a major step toward advancing treatment for patients with HER2 exon 20 mutation in small cell lung cancer. The filing is based on our positive data from Cohort 2 of ZENITH20 clinical trial, which consisted of patients with locally advanced or metastatic non small cell lung cancer, harboring HER2 exon 20 insertion mutation with fail previously. The R&D team is actively supporting the FDA review and already preparing for the ODAC meeting in September. We believe Poziotinib has the potential to be the first to market for this specific indication, an area of great unmet medical need. We now have initiated a randomized confirmatory study following discussion with the FDA and are operated with a great sense of urgency Study SPI-POZ-301 or PINNACLE is designed to enroll 268 patients with previously treated non small cell lung cancer harboring HER2 exon 20 mutation. Patients are being randomized two to one into this global multicenter study to receive 8-milligram of Posey administered BID versus 75-milligrams per meter square of docetaxel administered IV every three weeks. Patient will be evaluated at week six and every six weeks thereafter. Following progression on docetaxel patient will be allowed to cross over into the Pozi arm the primary endpoint will be progression free survival, with overall survival objective response rate, duration of response, disease control rate and safety at secondary objectives. This design will provide a power of 95% to test the hypothesis that Pozi is superior to docetaxel for a hazard ratio of equal or smaller than 0.58 using a two sided log rank test. A futility analysis conducted by an independent data monitoring committee to evaluate the PFS rate and will be used to validate the size of the study. Separately, I would like highlight that are Pozi clinical pro has now achieved two positive cohorts as demonstrated more recently by the positive results of Cohorot 4 and first line patients that were presented in March at the ESMO TAT Congress by Dr. Sun from the British Columbia Cancer Center. This data from the ZENITH20 study included a total of 70 patients, who receive 60 milligram per day of oral poziotinib. The first 48 patient of the cohort received 16 milligrams once daily, and an additional 22 patients receive 8-milligram BID, the primary endpoint was ORR evaluated centrally by an independent image review committee using resist 1.1 criteria. Pozi met the primary endpoint in these seven new frontline patients with an ORR of 41%, including one complete response. And then a valuable patient ORR of 50% safety profile was consistent with the TKI class, notably on target adverse events were reduced with BID dose. Treatment related grade three or higher adverse events were as expected, with rash, stomatitis, diarrhea and paronychia being the most common. The incidence of Grade 3 or higher pneumonitis continue to be low at less than 3% or two out of 70 patients with no drug related death. Now, let me shift to a presentation at the recent AACR meeting in New Orleans a few weeks ago. Preliminary results suggest that decrease in plasma circulating tumor DNA during Pozi therapy correlate with clinical response in patients with HER2 exon 20 insertion mutation in non small cell lung cancer. Additional data from this study has been accepted for presentation at the upcoming ASCO annual meeting in June. These new data will provide further evidence of a correlation between a decline and ctDNA with a clinical response to Pozi treatment and cover a longer observation therapeutic, so stay tuned. As you can see, we continue to make solid progress on our two late stage development programs and regulatory strategy. We will keep you posted as we achieve additional key milestones. That concludes our prime prepared remarks. And I would like to open the call for questions. Operator.

[Operator:]

Thank you Our first question comes from Maury Raycroft with Jefferies. Your line is now open.

[Maury Raycroft:]

Hi everyone. Congrats on the progress and thanks for taking my questions. I will start off with the Phase III program. Just wondering if you can talk about your view for the bar for docetaxel in that group and how confident are you that you can be substantially enrolled by the PDUFA date in November?

[Thomas Riga:]

Sure, pleasure to talk about this. So the, obviously, we are quite confident that we can be docetaxel. The extent of the establishing the superiority was, you know, given to you by the number of patients and parameters that I have declared to you. I’m not going to go beyond that. But the literature right now does not have solid data. It is a true medical need. There is no prior control study. And there is small retrospective study, you know, the average PFS, in the order of four months or less. And we think we could definitely beat that. I’m not going to go further on that. I can’t recall there was another aspect to your question, I believe.

[Maury Raycroft:]

Yes. Just if you can talk about enrollment, timeline expectations, and if you can be substantially enrolled in this study by the time of the PDUFA in November?

[Thomas Riga:]

Sure. So, obviously, the language of the fancily enroll is does not actually have a definition. So it is a matter we believe to demonstrate that we have made a meaningful progress. It is a rare disease and we will be able to demonstrate that we have made a very strong effort to recruit patients that we are anticipating adding potentially in excess of 100 sites globally, and we are actively engaged in opening the site as we speak. So we think we will be able to, demonstrate by the time at PDUFA date that we have made tremendous commitment and progress to bring a new drug with benefits for patient who currently have no drugs to rely on.

[Maury Raycroft:]

And I will just ask one other question on the Phase III study. Can you just talk more about the types of patients that you are anticipating enrolling into the study? Will you allow prior in HER2 or other targeted therapies prior to going on to the study for Poziotinib?

[Thomas Riga:]

Here we are. So this is the second line or more study and it will be essentially platinum base core initially when they fail and plus or minus checkpoint inhibitor, because there is depending on which country you are talking about and within U.S. practice differ and we will allow potentially other with a proper washout period additional type of therapy, including experimental therapy. We really are trying the medical needs.

[Maury Raycroft:]

Got it, all makes sense. Thanks for taking my questions. I will hop back in the queue.

[Thomas Riga:]

Pleasure.

[Operator:]

Thank you. Our next question comes from Ed White with H.C. Wainwright. Your line is open.

[Edward White:]

Hey Tom, thanks for taking my questions. So maybe just switching to eflapegrastim, we have talked many times in the past about the changing market and the G-CSF. Just wondering now, if there are any recent updates, as far as generic penetration goes, what you think the hurdles will be to launch? And when you are - you had mentioned that you have the leadership for the sales team in place when do you expect hiring the salespeople?

[Thomas Riga:]

So thanks for the question Ed. Let me take the first one regarding the market. We are still very enthusiastic to enter this market. It still sits today over a $2 billion market. The biosimilar penetration really is concentrated in two of them. Overall share of biosimilars versus the innovator product sits at 40% today, really with two new drivers of that penetration. We really believe today that having a novel agent that is not a biosimilar that we can bring customers, payers and patients, a solution that is not restrictive to some of the inherent realities of the reimbursement dynamics, as well as some of the patient offerings we can bring puts us in a position to be competitive. I mean, ultimately, we need to get the product approved, which that is our internal focus. But when we think about this commercially, we remain enthusiastic. And we believe that the core leadership infrastructure that we have kept, even post our restructuring carries a lot of the industry’s best talent and we think that is scalable, should we need it. But I think when you look at Salesforce sizing today, and oncology, there is a lot of consolidation in the business as well as some post-COVID realities from access standpoint that we believe we could get done our launch in a very lean and efficient manner. And we may have some nominal adds as needed. But our base commercial infrastructure will be our first line of defense as we engage both group purchasing organizations and large customers out of the gate to get the product off the ground, should it get approved.

[Edward White:]

Thanks Tom. And just a question on the restructuring and you had mentioned the, I guess the charge back to Hanmi. Can you just review why that happened and then what the run rate is you think going forward are the cuts that you have made going to be more predominantly seen in the back half of this year?

[Thomas Riga:]

So let me take the $11.2 million non-cash reversal first. As I mentioned in my prepared remarks, not only did we solidify an equity investment from Hanmi, but there were also changes to the licensing and the supply agreement. And this is ultimately some of the fruits of those agreements, which enables us to free up near-term cash flows from just a supply standpoint. So that that reversal, I think, is the first you are seeing of some of the fruits of the second half of that statement on the licensing and the supply agreement. So that is a onetime non-cash reversal. As it relates to run rate, so I think if you think about the first quarter, it is usually our highest burn quarter. So if you look period-over-period, it was 34.5 million or so a year ago, and today we announced 30.3 million, that has one time charges in it. So the number is lower by $4.5 million but there are some other restructuring costs that are built in there. So the impact of the FTE change, I think will continue to show itself in subsequent quarters. But I also think as we get to our action dates, and we start launching these products, you will see a rise in the back half of the year in the SG&A line just to prepare an execute on those on those launches.

[Edward White:]

Okay. Thanks Tom and perhaps the last question, just regarding the ODAC meeting. I just wanted to get your thoughts on maybe, what preparations are you doing? What are you expecting the advisory committee to ask?

[Thomas Riga:]

Thanks Ed. So here is how we are thinking about it, we are looking forward to the opportunity to bring this to an advisory committee and really share the full benefit that Pozi can bring in this high area of unmet need. So if you think about even at the acceptance, we had made some statements that the FDA had questions about the status of the confirmatory study, as well as questions on to dose. And today we announced the PINNACLE study, which has a dose of 8-milligrams BID, which is different than the 16-milligram QD registrational data. So it is for us very - it makes a lot of sense. It is very logical that the FDA, could have additional questions on dosing and wanting to hear from industry experts on how to bring that issue to resolution. But that is us looking at where we have been, what the discussions have been with the agency. Those are two of the issues that certainly could be discussed at ODAC. But, as the date gets closer, we will gain more clarity from FDA and obviously be prepared to represent the full NDA. So our preparation efforts are the last half of your question. They’re actively underway. We think we have got the right team in place to prepare and are looking forward to the opportunity.

[Edward White:]

Okay, great. Thanks Tom.

[Operator:]

Thank you. Our next question comes from Mayank Mamtani with B. Riley Securities. Your line is now open.

[Mayank Mamtani:]

Hi, good afternoon. thanks for taking our questions and congrats on the progress on regulatory filings. So maybe just following up on the prior sort of commentary on the 8-mig BID dose. I was just curious between now and ODAC, how much we will learn from your ongoing studies and what might be the data you are able to present to the panel on the 8-mig and then how do you how do you reconcile you know a full approval and a different dose with accelerated approval with a sort of different delivery schedule. And this is my final question was on the path for first line approval, given you have some data there in BID dose. And so what is the path look like and frontline, if you can reminder us on that on that?

[Thomas Riga:]

Mayank, you got a couple of questions in there. Francois, I will tag this one. Let me start with your first question. So the registration or the filing is based on Cohort 2, as you mentioned is 16-milligrams given QD and the PMR is at 8-milligrams BID, so both are 16-milligrams per day. We believe that 16-milligrams QD demonstrated a safe and effective dose for a patient population that needs a solution. I think the subsequent data has given an indication that there could be a more optimal way to reduce some of the on target toxicities. So I think that conundrum that you mentioned, is likely a topic that FDA would like to hear from industry experts at the ODAC panel. But we believe that that 16 QD is a safe and effective dose and obviously aligned with FDA on the confirmatory study to go with the 8-milligram BID. Francois, do you have comments?

[Francois Lebel:]

Yes. Sure. Yes, so exactly, the NDA is based on core to 16-milligram and taken once per day. At during the early phase of discussion with the agency, we have indicated to them that we had gathered additional data in Cohort 5, and that we had explored - and it was exploratory, we had looked at different dose, different frequency, et cetera. And, basically, ask them if they would be interested in seeing this data or not. And it is always very sensitive, because if once you seek an indication, you don’t want to add additional data, unless it is asked by the FDA. Otherwise, you modify the PDUFA date. So thankfully, the agency probably out of concern or of interest for patients felt okay, please send us the additional data. And that has led to multiple discussion, obviously, as to is BID dosing a better worse or what? And that is why I think Tom was highlighting to previously that may be a topic for discussion for ODAC. Essentially, we have provided them the data and during the 120-day update as well, we provided all the updates, it is pretty clear that when you give dosing and BID, we can improve the safety profile, which is obviously of great interest to physician and their patient and the FDA, for that matter. So, that is fundamentally what is going on here. 60-milligram as Tom has said it is safe and effective on the basis of what we have submitted in the NDA, but the agency may be interested in getting the opinion of various academic experts and industry et cetera at the ODAC.

[Thomas Riga:]

I think your other question Mayank was related to Cohort 4. We are obviously thrilled with the second cohort specific to HER2 exon 20 insertion mutations, demonstrating positive results. Our strategy with that is to take this in a stepwise fashion for a number of reasons to initially solidify the first approval for the product. But our aspiration for the asset extends both beyond just the initial indication, but also beyond even the frontline in HER2 evaluating rational combinations and others. But those discussions as it relates to Cohort 4 specifically with the agency would occur after we get through here the September ODAC meeting and subsequently the Thanksgiving PDUFA.

[Mayank Mamtani:]

Thank you for the needed clarification there. And then actually, the question I had was also on ACR data and some of the circulating tumor DNA work you are doing. Can you just talk to the relevance of that and sort of a real world commercialization setting? And, what are you trying to get at, with the use of a biomarker like that - yes, it would be helpful how you see that data was and the role it plays to commercialization plan?

[Francois Lebel:]

I can take this, do you want to Tom? So the ctDNA for us is the exploratory in nature. So in other words, it does have no direct impact on the NDA review here. But this is data that has been accumulated in the scientific literature that you can use or possibly can use a biomarker that is easy on the patient, meaning it is a peripheral blood sample, as opposed to an invasive tissue diagnostic or biopsy and you can actually or potentially monitor a therapy. And the first thing you have to establish is, did they correlate the impact of therapy modified ctDNA level, and that is kind of what we have shown as ACAR. And we will add data at ASCO. And the issue of becomes, can that be an early, biomarker prior to having imaging or confirmatory imaging? Can you predict the outcome of the patient in terms of positive outcome meaning response? And in terms of if the patient gets an escape and progression? Can you predict. And that could become a very important tool for us, as we go further in development with our program, especially in combination therapy. You want to move there fast. Because you have when you do combination, you have a lot of dosing question, other matters, you got to resolve and any early biomarker that gives you indication of activities always very helpful. So it is an expletory design, but nonetheless can become very important in the future.

[Thomas Riga:]

And I totally appreciate it. I appreciate your question that I think it really speaks to how we are thinking about the asset. So the IP of this drug goes well into the 2030s. And our aspiration for development extends well beyond the initial indication. And I think ctDNA is the direction that oncology is going and I think the sooner we get a body of evidence in that regard. I think it helps position the direction we want to take this as we look forward.

[Mayank Mamtani:]

Actually, just maybe a follow-up on the you know, that reminds me of the Dr. Heymach’s presentation from last year. As there been any progress, trying to work with synergistic mechanisms, the KRAS G12C kind of drugs, which can be good combination 5-milligram, you can evaluate, use a biomarker like this to assess early responders?

[Thomas Riga:]

Yes. So there has been progress and when we have something formal to announce, we certainly will. But rational combination is something that grabs a lot of our interests that our internal research committee meetings as well as our business development outreach. So when we have something formal to announce, we will certainly do that.

[Mayank Mamtani:]

Thanks for taking my questions.

[Thomas Riga:]

Sure.

[Operator:]

Thank you. And I’m currently showing no further questions in the queue at this time. I would like to hand the conference back over to Mr. Tom Riga for any closing remarks.

[Thomas Riga:]

No. Thank you for all of the participation on the call and for your interest in Spectrum is in all of your questions. We will be participating at the H.C. Wainwright conference. Later this month, we will also be attending Jefferies and JMP in New York. And we look forward to speaking to many of you then and if there is any other questions in the meantime, always feel free to reach out. Thank you, everybody. Have a good night.

[Operator:]

This concludes today’s conference call. Thank you for your participation. You may now disconnect. Everyone have a wonderful day.