Spectrum Pharmaceuticals, Inc.
Q4 2020 Earnings Call Transcript

Published: 30 Mar 2021

[Operator:]

Ladies and gentlemen, thank you for standing by. And welcome to the Spectrum Pharmaceuticals Fourth Quarter and Full Year 2020 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question-and-answer session. Please be advised that today’s conference is being recorded. I would now like to hand the conference over to your speaker today, Kurt Gustafson, Spectrum Chief Financial Officer. Please go ahead.

[Kurt Gustafson:]

[Joe Turgeon:]

Thank you, Kurt. Good afternoon, everybody, and thank you for joining us on the call today. We appreciate your interest in Spectrum and I am excited to be here. Spectrum has made great progress over the course of 2020 and that momentum is continuing in 2021 despite the challenges of pandemic and the impact that it’s had across the biopharma industry. Throughout 2020, the Spectrum team demonstrated dedication, creativity, and focus to maintain our overall momentum, which allowed us to achieve a strong finish in 2020. We achieved a number of important recent milestones that will form the basis for key activities in 2021. During the fourth quarter, we met with the FDA to review the filing strategy for the submission of an NDA for poziotinib based on the data from Cohort 2 of our Phase 2 clinical trial ZENITH20. This trial evaluated previously treated patients with non-small cell lung cancer with HER2 exon 20 insertion mutations. These positive results with HER2 exon 20 mutations demonstrated that poziotinib met the pre-specified primary endpoint in these patients. Based on our discussions, we reached agreement with the FDA to proceed with the submission of a new drug application for poziotinib. Adding to this positive news is the recent Fast Track designation that was granted by the FDA for this indication. This is welcome news for Spectrum and for the patients with this devastating disease. We are currently preparing an NDA and look forward to a submission to the FDA later this year.

[Dr. François Lebel:]

Good afternoon, everyone. It’s good to be with you today for a brief update. I will begin with poziotinib. Significant progress has been achieved in this quarter in spite of the COVID-imposed constraints. Preparation for submission of our NDA under a Fast Track designation is well under way and will be based on our positive data from Cohort 2 of the ZENITH20 clinical trial. This important milestone is scheduled for later this year. As you know, there is no approved treatment for a patient with HER2 exon 20 insertion mutation in non-small cell lung cancer, and we believe poziotinib has the potential to be first to market to address this area of great medical need. In early March, we presented data from our Cohort 5, which is evaluating 10 milligram, 12 milligram, 16 milligram QD or 6 milligram and 8 milligram BID dosing. This preliminary data demonstrated improved tolerability and efficacy with 8 milligram BID dosing. We observed reduced dose interruption and lower incidence of Grade 3 adverse events. This led to improve antitumor activity, which confirmed our initial hypothesis. Since then, the data from patients with EGFR or HER2 has matured further. We continue to be very pleased with this additional data on BID dosing that will be presented at AACR in less than two weeks.

[Kurt Gustafson:]

Thank you, François. Our SG&A expense for the fourth quarter of 2020 was $15.7 million versus $15.1 million in the previous year. R&D expense was $47.2 million versus $23.3 million. The increase in R&D expense relates primarily to a one-time charge of $28.2 million to write-down assets at our secondary source for ROLANTIS manufacturing facility. Much of this cost was related to equipment installation and validation processes, which will not be recoverable, while the actual physical equipment was written down to fair market value. Approximately three years ago, when we evaluated Hanmi’s capacity at Bioplant 1, there was a question about their ability to meet our peak demand forecast. As a result, we commissioned a second manufacturing source and invested significant capital at this facility. Since that time, a couple of things have happened. First, Hanmi has made great progress and invested in a brand new state-of-the-art facility in Bioplant 2 that will greatly increase their capacity. The completion of this facility is ahead of schedule and was constructed with investment in collaboration with large pharma partners and is now fully commissioned. Second, the timelines for our secondary manufacturer did not meet our expectations and as a result, it was deemed unlikely to be a solution for us at peak demand. So as we evaluated the capabilities, risks and economics of these two manufacturers, we believe that the combination of Hanmi’s Bioplant 1 and Bioplant 2 will provide the most efficient and cost effective solution to our long-term supply needs. And as a result, we have made decision to discontinue our work at the secondary manufacturing site, which is what’s leading to discharge. This has no impact on your term launch supplies. We currently have over 12 months of supply here in the U.S. ready for the launch. Moving on to other income expense, the gain in the fourth quarter was $12.9 million, compared to a loss of $0.4 million in the period a year ago. Again primarily relates to an increase in the value of our equity holdings in CASI Pharmaceuticals. Out net loss for the quarter from continuing operations was $49.9 million versus $40.2 million in the comparable period in 2019. On a non-GAAP basis, which primarily backs out one time impairment charge, stock compensation costs and the change in value of our CASI securities, our loss for the quarter was $28.9 million versus $33.4 million in the prior year period.

[Joe Turgeon:]

Thank you, Kurt and thank you, Dr. François. I think you can see from everyone’s remarks that Spectrum continues to make strong and steady progress on our pipeline. We look forward to the completion of the inspection of our ROLONTIS manufacturing facility. We will update you later this year on the progress of our NDA for poziotinib and the sharing results on our ongoing Cohort in a ZENITH20 clinical trial. Once again, I’d like to thank our entire team for their hard work and their dedication in these unprecedented times and we look forward to keeping you informed on all of our future progress. With that, I’d like to open a call for questions. Operator, if you could open the call up please?

[Operator:]

Thank you. Our first question comes from Maury Raycroft with Jefferies. You may proceed with your question.

[Joe Turgeon:]

Hey, Maury.

[Maury Raycroft:]

Hi, everyone. Hi, everyone. Congrats on the progress and thanks for taking my questions. First one is just on ROLONTIS kind of a naive question. But just wondering if you can provide more clarity into specific next steps after the inspection and what timing could look like there? And has FDA given you any feedback on the rest of your BLA filing which includes the clinical data?

[Joe Turgeon:]

François, do you want to comment on that?

[Dr. François Lebel:]

Sure. So let me start with -- let’s just say that when we got the deferral as opposed to a complete response CRL that usually indicates that the FDA is, they are pausing their review and the only step left to our knowledge is the inspection. We have had a lot of discussion with the FDA on all the other matters, and our understanding is that we have answered all their questions satisfactorily. So, we believe the inspection is fundamentally the last step.

[Maury Raycroft:]

Sure. Yeah. That will be great if you want to go more into launch activities that would be helpful as well.

[Joe Turgeon:]

Yeah. Tom why don’t you comments on your launch readiness?

[Tom Riga:]

Hey, Maury. It’s Tom. We are thrilled and we can’t wait for this approval, and we are ready to launch. We will be out in force upon approval. We have the leadership team in place. We have a gated hiring of our sales reps, which the vast majority have been identified, and we will begin demand generation soon thereafter approval, and we are looking forward to this inspection in May.

[Maury Raycroft:]

Got it. Okay. That’s helpful. And maybe one follow-up on AACR, just wondering if you are going to break out Cohort 5 patients by mutational status, and can you say how much follow-up and how many additional patients are going to be at AACR relative to the ESMO TAT update?

[Tom Riga:]

Right. Let me start with the nature of the communication. So, we are going to be speaking on both EGFR and HER2 patients, and we will be focusing on the dosing. So, in other words, we are going to provide result, activity, anti-tumor activity, as well as safety profile of the 10-milligram to 12-milligram and the 16-milligram, as well as the 6 milligram and 8 milligram BID. So that’s the focus for the initial communication, and we will actually be reporting on an excess of 100 patient total.

[Maury Raycroft:]

Great. Okay. And I know are you seeing anything on the amount of follow-up time for the patients?

[Tom Riga:]

Yeah. Well, the follow up will vary simply because we will report -- we will be reporting -- very fresh results. So, obviously, there’s going to be more detail at AACR. But at this time, I would just say that we are confident that we can report preliminary data, and we have come to some conclusion and we will communicate that at AACR.

[Maury Raycroft:]

Okay. Thank you very much for taking my questions.

[Tom Riga:]

Sure.

[Joe Turgeon:]

Thank you, Maury.

[Operator:]

Thank you. Our next question comes from Alethia Young with Cantor Fitzgerald. You may proceed with your question.

[Emilia Falcetti:]

Hi. This is Emily on for Alethia. Thanks for taking our questions and congrats on the progress. I was wondering if the FDA has already begun doing international inspections or if May is kind of their assumed timeframe for starting those up again? I guess, is there any risk that the May timeline could be pushed back or is that -- do you feel that that’s like a pretty definite timeframe?

[Joe Turgeon:]

Yeah. Thanks, Emilia. I will answer. First of all, I can’t answer in general what the FDA’s position is on international inspections. I can only speak for ours. But I can tell you that we have already -- they have already met with Hanmi and our personnel, and they have gone through COVID -- all the procedures with COVID, the way everything is going to be done. And they are all set to come in May. So, everything is being set up. So we feel that unless something crazy happens, we are looking forward to having the inspection done in May.

[Emilia Falcetti:]

Okay. Great. Thank you.

[Joe Turgeon:]

Thank you.

[Operator:]

Thank you. Our next question comes from Ed White with H.C. Wainwright. You may proceed with your question.

[Ed White:]

Hi, guys. Thanks for taking my questions.

[Joe Turgeon:]

Hi, Ed.

[Ed White:]

Hey, Joe. So as far as pozi goes in, how should we be thinking about EGFR exon 20 mutations? With the BID dosing, is there a potential to readdress this market and perhaps develop a new study or expand the Cohort 5 to focus on EGFR alone?

[Dr. François Lebel:]

Yeah. Ed, François. So very good question. As you know, obviously, we met their primary endpoint Cohort 2 on HER2 second line, but we have shown consistently across the other Cohorts, although Cohort 1 and Cohort 3 have not met primary endpoint, we showed pretty significant clinical activity there, nonetheless. So yes, we are re-examining, Cohort 5 was enrolling patients that were EGFR and/or HER2 or I am sorry not and but both, either one, and we will present data at AACR. The majority of which will actually come from EGFR patients. So we will be reporting and making comments on the various dosing strategy and other general impacts. Obviously, as I said, the data is fresh off the press. So, it’s going to be preliminary, but nonetheless, I think, it will be very informative.

[Ed White:]

Okay. Thanks, François. And then perhaps a question for Kurt, how should we be thinking about SG&A and R&D expenses going forward. As you mentioned, there were a lot of one-time factors in the fourth quarter numbers, so I am just wondering how we should be thinking about SG&A and R&D costs going forward throughout 2021? And then it seems that Tom is going to hire the bulk of the sales force once you get approval, so for ROLONTIS I just want to make sure I heard that correctly? Thank you.

[Kurt Gustafson:]

Yeah. No. So, I guess, the guidance I would give you on SG&A costs, Ed, would be, if you just take a look at historically we have been pretty consistent around that $15 million number. Now that number per quarter, right? So that number will go up slightly as we hire additional sales folks. But this is not a big sales team so it’s not going to be a dramatic increase. But there will be marketing costs as well. So that will go up as we move into kind of the actual launch period for ROLONTIS. With regards to R&D, that number can be, it can bounce around a little bit depending on whether or not we are buying inventory. As you recall, when we purchased preapproval inventory that’s classified as an R&D cost and so when we take possession of that material that can kind of bump the numbers up and down. When we sell it, it will come out it is as a zero cost of goods sold eventually. Post approval, those costs would be booked as inventory. So you might actually see R&D costs for that perspective go down. So I think you can go back and take a look just in general if you average over the previous quarter it can give you a good signal for kind of a longer period of time but quarter-to-quarter it could bounce around a little bit.

[Ed White:]

Okay. Thank you, Kurt. Oh, Kurt one last question on the...

[Kurt Gustafson:]

Yeah.

[Ed White:]

On the ATM, you had a $21 million raise thus far this year. What was the number of shares that were issued associated with that $21 million raise?

[Kurt Gustafson:]

Ed I am going to have to go back and look my recollection is right around 5.5 million shares. But let me -- we will report those numbers in the 10-K tomorrow.

[Ed White:]

Okay. Great. Thank you.

[Joe Turgeon:]

Thank you, Ed.

[Operator:]

Thank you. Our next question comes from Mayank Mamtani with B. Riley Securities. Please proceed with your question.

[Sahil Kazmi:]

Hi. Good afternoon team. This is Sahil Kazmi on for Mayank. Congrats on all the progress in the quarter. Just a couple of brief questions from us, maybe first relating to the data expected with AACR from the 20 Cohorts. Any dosing info both on the efficacy and sort of safety and tolerability side that might be relevant to include in the ongoing NDA submission as it relates to Cohort 2? Is this some data that the agency may benefit from and then just a brief question on the same day dosing trial afterwards?

[Joe Turgeon:]

Sure. So, yes, look, the NDA and the discussion we have had so far with the FDA is relates to Cohort 2. And as you know, Cohort 2 was done with 60-milligram per day and we met the pre-specified endpoint actually exceeded a little bit. So that’s going to be the focus of the submission. Now when you do a submission you ask to provide the FDA essentially complete information about what about the drug and safety, efficacy, et cetera, including a section called dose justification. So obviously we are going to be providing them additional information on some of our findings with BID dosing, and as you know, we have presented before at ESMO just recently that BID dosing actually had a positive impact and signal about better anti-tumor activity, but also pretty significant reduction in adverse event. So we will definitely see the information and we will have good discussion, but the core of the submission is Cohort 2.

[Sahil Kazmi:]

Great. That’s very helpful. Thank you. And then, as you think about the same-day dosing trial with ROLONTIS, can you talk about in the context of the expanded enrollment how you think about the path forward?

[Joe Turgeon:]

Sure. So we -- the expansion to 15 patients, we fundamentally want to confirm the same safety profile we saw in 30 minutes, which was not dramatically different from the large pivotal trial we had done when we gave the drug 24-hour later. And we want to make sure that the attributes that we are seeing there. Meaning the more rapid recovery from neutropenia is seen as well. So if all those things are seen we probably would engage in a discussion with the FDA to path forward. We have developed some plans but I don’t want to go in detail now until we do the next step of expanding to 15 and then talking to the FDA.

[Sahil Kazmi:]

Got it. All right. Thank you very much for taking our questions and very much look forward to the data at AACR. Congrats on the progress.

[Joe Turgeon:]

Thank you.

[Kurt Gustafson:]

Thank you. Operator if you can hold on one second. Ed I looked up your number. If you are still on the line it was 5.7 million shares that we were issued in the quarter. You can continue, Operator.

[Operator:]

Thank you. Our next question comes from Reni Benjamin with JMP Securities. Please proceed with your question.

[Reni Benjamin:]

Hey. Good afternoon, guys. Thanks for taking the questions and congrats on the quarter as well. Great to see that the inspection’s moving forward and it’s coming up. I guess based on the comments that were made I just want to confirm about a month after the inspection is done we expect to have an FDA decision. I just want to make sure I heard that right. And lastly the decision is made right and presumably an approval, can you just talk a little bit about you know how long after we could have the launch, because I am thinking that it could be kind of a staggered launch as sales people are hired that they make it kind of get going or do you have to wait for all 60 to kind of be onboard before we can really start thinking about revenues? And should we be thinking about revenues in the third quarter, fourth quarter, how should we be seeing this rollout occur?

[Joe Turgeon:]

Yeah. Reni, this is Joe. I am going to start and I am going to let Tom comment more on the launch itself and the timing of revenues, et cetera. To answer your first part of your equation on clarity. Generically we said it, we don’t know the exact time that it usually takes about a month or so and that’s what we are saying. So we don’t know for sure when the agency will we will get back less. But I want to stress we feel and that’s what I have been indicated to us that the last step in the procedure here, because we didn’t get a CRL back when we got the deferral. So we hope this is the last and we assume this is the last piece. There is no other thing to do after that. So that’s why we said about a month. That’s just speaking generically from other drugs. And I hope that helps on that other drug approvals. Now, Tom, why don’t you walk through the -- on the timing of what’s happening in the launch.

[Tom Riga:]

Sure. Reni, I think, just by way of reminder, we have approximately 25 of the 60 FTEs onboard today. So the hiring will be attributed upon a successful preapproval inspection and we will bring those folks onboard. So if you are thinking about approval plus you begin demand generation with the leadership team, all contract rollouts and beginning to engage customers in pretty short order post-approval. You would then have certifications, training and customary things like license number being affixed to the syringes, final PIs being printed. I think in line with biologics you think about four weeks to eight weeks post-approval for product channel and real demand generation to be filled is kind of how we are thinking about that.

[Reni Benjamin:]

Got it. And can you remind me some of the discussions you have been having regarding reimbursement, because it’s not a biosimilar, you are differentiated, can you just remind us kind of where you are what’s that?

[Tom Riga:]

Yeah. So we have been very active and the final approval and label will trigger the submission to CMS. So the initial launch would be with miscellaneous J99 Code and then you would figure in the neighborhood of a quarter depending on the actual timing, there are timing windows, CMS shorten those windows of what they used to be. But depending on the actual timing of approval you would then launch with a miscellaneous J-Code, customers would have we would extend dating terms or miscellaneous J-Codes and then CMS would issue a permanent J-Code, that is independent for ROLONTIS as a BLA product, we would be in unilateral control of our own discounts rebates and reporting to CMS and ultimately the reimbursement of the product would not be contingent upon anybody else’s activity other than ours. And I think at the end of the day what that equates to is stability and predictability at the customer level for how they should be thinking about reimbursement. So when we look at this, we think it’s a real advantage at a time when there is a fair amount of kiosk in a very significant market within white cell GCSF and we think it gives us a unique opportunity to both be competitive and offer physicians an alternative choice.

[Reni Benjamin:]

Got it. Perfect. And then just one question on the same-day dosing we have the expansion for 15 patients. When -- how -- I guess how quickly do you think we could get those patients. And I guess it’s just going back to the previous question, but if we expect let’s say those results, I am going to say within six months or so, correct me if up with my timing is off. It seems like you might be able to go with that straight to the FDA to come up with some sort of a -- maybe a little bit of a larger study, maybe a bridging study or do you think you might be able to actually modify the label according to these -- just these one that a number of patients?

[Dr. François Lebel:]

Yeah. So it’s François. I will take that one. So I just want to be clear that the initial filing in the BLA that’s under review where we are talking that the last step is the inspection at least we believe so. So we don’t have anything about the same day dosing in that potential approval in near-term. Now as soon as we go through the expansion, get the data, if it confirms what we saw earlier and it really truly -- there is that attribute of our product that -- it is -- because it’s novel it has meaningful difference from some of the biosimilar or the originator in the sense that it adds different kinetic and especially different pharmacodynamics it stays in the marrow longer. So, all these attributes make it a little different here in its behavior and from the others. And so those elements would have to be discussed with the FDA as to what is the next step and depending on the strength the signal we see in the expansion that’s really going to affect our design of the next study. And I wish I could tell you more now but unfortunately we are going to have to wait to get those results. We think by the way that…

[Reni Benjamin:]

Okay.

[Dr. François Lebel:]

…we should be able to recruit those patients quite rapidly. We don’t expect a protracted long or difficult recruitment.

[Reni Benjamin:]

Got it. Okay. No. Thanks for the clarity on that. I guess just one final question for you, it’s probably for you François. The -- we have Cohort 5, the various dosing schedules. I guess I am trying to understand what are then the next steps, like let’s say, we decide, okay, look, 8 mgs, BID looks really good based on these expanded number of patients. Kind of what happens that at that point? Do we do we just kind of leave it out there as a published manuscript and once pozi gets approved for HER2 patients -- HER2 exon 20 patients, physicians can utilize the literature and kind of modify it themselves or do you feel that what you really want to get out there and expand that dosing schedule to EGFR, exon 20 insertions, as well as maybe get a formal label change by conducting a proper study?

[Dr. François Lebel:]

Yeah. So look I don’t want to get ahead of myself here in 10 days or so. You are going to see the abstract and then the presentation. So, obviously, we need to wait for that. But if we assume that the signal is good against EGFR and continues to be good with HER2, the natural thing that one would do other than discussing it with the FDA obviously would be further expansion of a Cohort that looks good, right? That’s the normal thing that you would do. The timing obviously would be critical. We have to be careful because when you present new data to the FDA, it can change your PDUFA date. So we got to be very careful and proceed cautiously. But at the same time we want to share the good data that we think we have and we will provide you at AACR. And we have got Fast Track designation. There’s a reason for that. There’s a real medical need here. And pozi certainly appears to have some very good thing in comparison to some of the other drug in development.

[Reni Benjamin:]

Sounds great. Thanks very much for taking the questions.

[Joe Turgeon:]

Thanks, Reni.

[Operator:]

Thank you. And I am not showing any further questions at this time. I would now like to turn the call back over to Joe Turgeon for any further remarks.

[Joe Turgeon:]

Thank you, Josh. And I’d like to conclude the call and say thank you for all of the participation and everybody’s interest on the call today. I really appreciate it and I’d like everybody to have a great afternoon and we will be we will be speaking in other financial meetings along the way here. So we look forward to presenting at AACR and future data as the year goes out. Thank you very much for your interest.

[Operator:]

Thank you. Ladies and gentlemen, this concludes today’s conference call. Thank you for participating. You may now disconnect.