Spectrum Pharmaceuticals, Inc.
Q1 2019 Earnings Call Transcript

Published: 10 May 2019

[Operator:]

Good afternoon ladies and gentlemen, and welcome to the Spectrum Pharmaceuticals First Quarter 2019 Financial Results Conference Call. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to turn the conference over to your host Mr. Shiv Kapoor, Vice President of Strategic Planning and Investor Relations.

[Shiv Kapoor:]

Thanks. Good afternoon everyone. Thank you for joining us today for Spectrum's first quarter 2019 financial results conference call. Our press release is available on our website at www.sppirx.com. Joe Turgeon, our CEO and President, will start the call and provide an overview, followed by a financial update from our CFO Kurt Gustafson and a discussion of our clinical development operations from our CMO, Dr. Francois Lebel. Before we get started, I'd like everyone to refer to the notice regarding forward-looking statements included and today's press release. This notice emphasizes the major risks and uncertainties 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 upon 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. Today's call will also include a discussion of non-GAAP financial measures, which should not be considered in isolation from or as a substitute for financial information presented in compliance with GAAP. With that, let me hand the call over to Joe.

[Joe Turgeon:]

Thank you, Shiv and thank you to everybody on your call, for your interest in Spectrum. Q1 was a strong quarter with significant developments. We've made bold moves to strategically shift the company and jumpstart our evolution from a spec pharma company into a growing biopharmaceutical company. This includes the sale of our legacy oncology portfolio and just today we announced the expansion of our oncology pipeline into immuno-oncology. We also continue to advance the development of our late stage assets poziotinib and ROLONTIS, the cornerstones of our Company. On the poziotinib front, we made significant progress in our clinical trial the ZENITH20 trial. Full enrollment of the previously treated EGFR cohort or cohort 1 was announced in early January and we expect the primary analysis results in the fourth quarter of this year. Regarding ROLONTIS, we continue to have productive discussions with the FDA and plan to meet with the agency in the near term. We are being thorough and deliberate in our updating our file, do we hope it happen to the FDA as soon as it's ready. We look forward to a successful submission and it's optimal approval. Now let me shift to the deal that we announced today. We closed the deal to purchase the Focused Interferon Therapeutics or FIT platform along with two early stage assets for immune gene. We are now on the forefront of developing a novel class of FIT therapies in immuno-oncology. Let me tell you why I liked this deal and how it fits into our strategy. It is consistent with our vision, it's great science, good value and it's the right fit for our company. When you look at the vision it is consistent with our commitment to bring innovative products to serve several areas of unmet needs in cancer. The science is validated through collaboration with multiple world-class scientific organizations, which include a UCLA, UPMC and the Leukemia & Lymphoma Society. It's a great value because the deal terms are highly favorable for our shareholders. And finally it sits as it complements our late stage assets. Our team has considerable experience in this area, which will help also. Overall this is a great deal for the Company and I look forward to seeing the results from the initial studies. Dr. Francois is going to walk you through in more detail on the products and the platform. 2019 is off to a strong start and I'm proud to say that our strategy is taking shape, we're now a biopharmaceutical company with a growing oncology pipeline. With that, I'm going to turn it over to Kurt for the financials.

[Kurt Gustafson:]

Thanks Joe. The sale of our commercial product portfolio to Acrotech closed on March 1. And as a result of this sale our financial statements will look a bit different than what you've seen before. Under GAAP, the financial statements are split between continuing operations and discontinued operations. If discontinued operations representing the portion of the business that was sold to Acrotech. As a result, you'll note that the product sales and cost of sales are missing off the face of our financials as these items are reported as discontinued operations. Note that GAAP requires that we report all historical periods in the same manner. With regards to continuing operations, our SG&A expense for the first quarter of 2019 was $16 million and R&D expense was $21.9 million, which includes $9 million in purchases of ROLONTIS drug substance. As a reminder, our accounting practice is to expense this inventory as R&D until the product and facility have been approved. When that material is later sold we’ll report zero cost of good sold for this material given that was previously expensed. We also had an $11.3 million loss in other income expense due to an unrealized loss in the value of our equity interest in CASI Pharmaceuticals. Our total loss from continuing operations was $39.8 million. However, on a non-GAAP basis, which primarily backs out certain severance related costs and stock compensation costs or non-GAAP loss from continuing operations was $29.3 million. Post the close of the transaction, our cash position is even stronger. We ended the quarter with $277 million in cash and $33 million in marketable securities for a total of $310 million. Included in this figure is $4 million of cash classified as restricted cash. This represents an amount held in escrow as part of the Acrotech transaction that is due to be released when certain post-closing performance obligations are met. Regarding guidance, given that the launch of the ROLONTIS will be delayed relative to our previous expectations, we expect to postpone certain prelaunch expenditures that were planned for 2019. We plan to update guidance once the file has been accepted. And with that, let me hand the call over to Francois to cover updates on the clinical programs.

[Francois Lebel:]

Thanks Kurt. Hello everyone. I'm going to start by providing an update regarding our late-stage asset, poziotinib. The pozi development program is focused on investigating the treatment of exon 20 insertion mutations across tumor types. Exon 20 mutations are among the most difficult to treat and currently have no FDA approved targeted therapies. These patients and their physician really need new treatment options. We are well underway with our pivotal multi-centric trial called ZENITH20. As Joe mentioned, we expect the primary analysis results from cohort 1 in the fourth quarter of this year. Regarding the HER2 previously treated cohort also called cohort 2. Our guidance was that we would be fully enrolled by Q4 and enrollment is well ahead of previous expectation. Currently, treatment options are very limited and prognosis is very grim for these patients. Poziotinib has the potential to fill a clear need for patients with this type of lung cancer. In addition to cohorts 1 and 2 in previously treated patients, we are aggressively enrolling in cohorts 3 and 4, which are evaluating poziotinib as first-line therapy in both EGFR and HER2 patient with exon 20 insertion mutations. Additionally, we're also planning to evaluate poziotinib in other tumor types and in combination where we have promising preclinical data. As previously guided, we are looking to start this trial in the second half of this year, so more to come in the future. Regarding ROLONTIS, we are refining our BLA file and anticipating meeting with the FDA in the near-term. Additionally, ROLONTIS data have been accepted to be presented in a poster session at ASCO in Chicago in June. These will be integrated data from our two Phase 3 trials with a total of 643 patients. As previously reported, each one of our Phase 3 studies independently met were primary and secondary endpoints. We look forward to sharing the integrated data at ASCO. Now let me shift to today's acquisition of the FIT platform and two early stage assets. This is a welcome addition to our pipeline in a space that I know well. The FIT platform creates a new class of biotherapeutics, engineered by fusing interferon alpha with monoclonal antibodies targeting various validated tumor antigens. Interferons are very potent cytokines that are well established as the immune form of therapy for cancers. However, interferons have historically been associated with significant dose-related systemic side effects. We believe that the FIT technology has the potential to maintain the efficacy and minimize toxicity. These novel therapies have potential application as single agent or in combination with other rational therapies, including with checkpoint inhibitors. The first asset is an antibody interferon fusion molecule directed against CD20. This drug candidate is in Phase 1 development, being studied in relapsed/refractory non-Hodgkin lymphoma, including diffuse large B cell lymphoma where a considerable unmet medical need exists. In preclinical models, this fusion protein has been shown to have significant proapoptotic activity and anti-CD20-interferon alpha is essentially a two pronged attack whereby both CD20 and interferon receptor signaling pathways can be activated to induce tumor cell apoptosis. Preclinical results suggest that anti-CD20-interferon alpha fusion protein have an improved therapeutic index, while still exhibiting the ability to eradicate tumor cells. The second asset is an antibody-interferon fusion molecule targeting GRP94 or heat-shock protein. This asset has demonstrated the potential for treating both solid and hematologic malignancies and is in preclinical development. Our clinical team looks forward to an ongoing collaboration with UCLA, the discoverer of this platform. In the near-term, we will complete the dose escalation study of the fusion protein directed at CD20 and bring the anti-GRP94 to the clinic as soon as possible. We will update you on milestone in the future. Poziotinib and ROLONTIS remain the cornerstone of our development portfolio. The new FIT platform and asset nicely expands the pipeline with early-stage but promising candidate. Now I'd like to turn it back to Joe.

[Joe Turgeon:]

Thank you, Dr. Francois. I hope you see it's clear that Spectrum has made some major shifts in the first few months of 2019. And we'll continue to make bold moves to strengthen the company as we move forward. And with that, I'd like to open it up, operator to questions.

[Operator:]

[Operator Instructions] First question comes from the line of Alethia Young from Cantor Fitzgerald. Your line is now open.

[Unidentified Analyst:]

This is Emma on for Alethia. On today's acquisition, I guess just curious, were you in the market for an I-O platform specifically or what was attractive about this opportunity versus others you might have looked at? And then just looking at the current pipeline and your cash balance, are you still looking to bring in any additional assets and what would the ideal profile of those be?

[Joe Turgeon:]

Yes, I'll start and I'm going to let Dr. Francois also get involved. I think what we're looking for is, FIT, it fits our vision. We want to look for unmet medical need in cancer. That's the first thing we look at. We want validated science, obviously. Things that are synergistic and are fit of where we're going as it would fit commercially down the road with the drugs we have in oncology and hematology. And that are – we have the expertise to move forward as we have in the past. So that's basically what we're looking for in oncology. And Dr. Francois, I'll let you add from your perspective if you'd like.

[Francois Lebel:]

Right, I think it's just made a lot of sense as Joe was highlighted to you. Immuno-oncology, as you well know, is kind of the way forward for oncology. And we happen to have a lot of experience in the company, including myself, where I've worked with a number of cytokine in the past and CAR therapy for that matter. But this was a unique opportunity where we had a chance to get our hands on the assets that are targeting a validated target at a very attractive price. So it was a unique opportunity that we could not pass.

[Joe Turgeon:]

I think you asked about immuno-oncology. Sure. That's a really interesting area right now. We're glad to be in it.

[Unidentified Analyst:]

And then just as you think about any potential future acquisitions, like that’s neither still appetite for?

[Joe Turgeon:]

I didn't hear the end of your question. Could you repeat the end? I'm sorry.

[Unidentified Analyst:]

Sure. Just following this acquisition and looking at your cash balance now. Are you still in the market to bring in additional assets beyond what was announced today?

[Kurt Gustafson:]

Our business model is to acquire new products. So this is consistent with the vision and mission that we have here. So we were always on the look and hope to continue to build this portfolio.

[Unidentified Analyst:]

Thanks so much.

[Joe Turgeon:]

Thank you.

[Operator:]

Your next question comes from the line of Ed White from HC Wainwright. Your line is now open.

[Ed White:]

Hi guys. Thanks for taking my questions.

[Joe Turgeon:]

Hi, Ed.

[Ed White:]

First of all on ASCO, congratulations. It seems like it's a change from previous years when – it didn't seem like ASCO was interested in the treatment of chemotherapy-induced neutropenia patients. So with all the new therapies on the way though, obviously behind ROLONTIS, do you think that there's some more excitement in the medical community now in this area again and from what you're seeing as you prepare for your launch? And then also – well, I’ll come back to another ROLONTIS question after that.

[Joe Turgeon:]

Yes, I’ll start and then Tom can comment too. I do think that there's excitement. For years and years and years and I was a big part of that, as you know, it was only one place, one-stop shopping, so to speak. And I think that this is changing the game, so to speak in all these opposites for the first time. And I think what makes us even more unique is in this, as new products come out, we’re the only novel therapeutic that's coming right now since the beginning. The others are biosimilar so had put us in a very unique position. So yes, we're excited about ASCO too because in the poster, you'll get to see the integration of both trials and it was good that ASCO accepted that. So you're right, they did accept the poster and you get to see the data combine these two trials. And Tom, I'll let you comment also.

[Tom Riga:]

Hey, Ed, it’s Tom. I think competition always brings interest, especially in really large markets that are important to oncologists and supportive care has had a lot of attention over the past year and will continue into the next several. So we're excited to be a part of it, get this file back to the agency and ultimately achieve approval.

[Ed White:]

Okay. Thanks, Tom. And then just on something that Kurt had said about ROLONTIS being delayed in postponing the prelaunch expectations in 2019. Am I reading too much into this? I mean, are you thinking now that the launches are going to occur into 2020 or do you think 2019 is still a possibility?

[Joe Turgeon:]

You know Ed, I don’t want to comment on the when until we've got an upcoming meeting with the agency which I think we’ll be in a better position to see where we're at. I'll remind you this, we're working diligently to prepare the – that the C&C module, I'll remind you, they told us exactly what they want. They're working with us being very helpful. So I look forward to the next meeting. I'm really pleased with the progress we're making on that part of the file. And I'll remind you, as you well know, that the clinical data was sound. It was – both the primary and secondary endpoints, which is you could argue the hardest part of that thing. And then in the near-term, we plan on filing it as soon as it's ready. And again, after the meeting with the agency, we'll know more about when. So I hope that answers your question.

[Ed White:]

Yes. No, it does Joe. Thanks. And just again on ASCO, I was just curious if – there was nothing in the enhancement, so I expect – I’m assuming that there's going to be no abstracts or presentations on pozi at ASCO, but I'm just curious as if an abstract or was submitted by either Spectrum or Dr. Heymach for poziotinib?

[Joe Turgeon:]

No, nothing was submitted. I’m not – you know that our data will be in the fourth quarter from cohort 1.

[Ed White:]

Okay. And then just in that vein too, last question, just, I know you didn't really give a timeline for cohorts 3 or 4, but can you tell us how the progress of enrollment is happening there? Is that within expectations or anything you can give us on that? I’d appreciate. Thank you.

[Francois Lebel:]

Yes. Thank you for the question. So yes, we're recruiting. We're on track for the recruitment of dose. We have number of additional site opening in Europe in the near-term. So we think we're on track and we think things will potentially even accelerate. And I think even more important is we're guiding you today, which is new that even though we said cohort 2 will be Q4 event, that the recruitment is particularly going well there. So stay tuned.

[Joe Turgeon:]

Ed, I'll just add one thing. When you look at cohort 1 ahead of schedule, cohort 2 now, Dr. Francois tells you ahead of schedule. It certainly demonstrates the unmet need here. There's a need for these patients, no question.

[Ed White:]

Okay, great. Thanks Joe. And I misspoke before, actually, I wasn't expecting ROLONTIS launch until, until 2020. I mistakenly said 19. But it seems like, it's that once you think that you'll give us an update as students become more clear. We like after you meet with the FDA or you get some more clarity, will you be conveying that to investors?

[Joe Turgeon:]

Well, as I said right now what I am going to tell you is that we got the upcoming meeting, we want to get this file in, as soon as it's ready, that's what we're going to do.

[Ed White:]

Okay, good enough. Thanks Joe.

[Joe Turgeon:]

Thank you. Ed.

[Operator:]

Your next question comes from the line of Maury Raycroft from Jefferies. Your line is now open.

[Maury Raycroft:]

Hi, good afternoon and thanks for taking my questions. First one is just on poziotinib on cohort 2. So it sounds like the enrollment for that is going pretty well. Are you at a point where you think the data may come earlier than expected then?

[Francois Lebel:]

Now we've not changed the guidance officially here, it's still Q4 for full enrollment. But we're just telling you that things are moving along very nicely. We have not changed anything in terms of the data. We would have to follow patient following the last patient in to make sure that we have not only response but durable response. So there's no change on that front.

[Joe Turgeon:]

More on the other thing I will, I will remind you is that each of the four cohorts are powered individually and standalone. So, I'll remind you that.

[Maury Raycroft:]

Got It. Thank you. And then the CD20 Interferon acquisition, it's pretty interesting. And so that Phase 1 trial that I'm enrolling right now, can you give a status update on that and how many patients are in and are you at a therapeutically active dose?

[Francois Lebel:]

Yes, so this was a three by three dose escalation study. And if you go to clinicaltrials.gov you obviously will see the other parameters. There was a number of cohorts and we have not, we're not going to announce anything right now in terms of how many need cohorts. Obviously you're looking for a maximum tolerated dose so we'll do as many cohorts as we need. The only thing I can say right now is that, there is good progress in terms of the number of cohorts that have been dosed and, but there's few more and the safety profile is very much in-line with what’s expected meaning very likely to be much better than a traditional interferon. So we're not going to give today any resolve as to number of patients or any more detail. Obviously we will present eventually in an appropriate scientific forum the results.

[Maury Raycroft:]

Got it. Okay. And then just asking about the molecule, some more details around that. I'm wondering if you could say anything about the CD20 IgG format or even the epitope that it's targeting, if there's something unique about that you can comment on.

[Joe Turgeon:]

So, we believe that we have a proprietary technology through the license that we got from UCLA. And I don't think we have disclosed or planning to disclose any detail as to which epitopes or what modification were done on the antibody fragment or, and on the interferon moiety either.

[Maury Raycroft:]

Okay. And then, also in the update was a line in there about the FIT antibody delivery platform. And I'm just wondering if you could talk more about what that is exactly.

[Francois Lebel:]

Well, it's a very attractive or flexible platform. It as I mentioned in my comments there, it, you have the possibility to deliver a double hit there . You'd get the potentially the activity of the interferon, that leads to an interferon induced gene expression signature. And so you get that benefit. And as you know, in the past, the problem with interferon has not been the lack of activity as an anti-tumor molecule. It was the toxicity, the systemic toxicity. And let's just say that the preclinical data as well as so far the clinical data is very encouraging that, there might be a truly a way here to get the benefit of interferon without necessarily the toxicity. So, that's very encouraging and that's only one aspect of it. You want the interferon to be delivered to the tumor microenvironment and that's where the other parts of the molecule, which is targeting to a tumor antigen, brings a higher quantity of the interferon right to the site of needed action if you want. So you've got a double whammy if you want. You get the interferon benefit, minimal activity in the systemic circulation and concentrated activity, at this site in the tumor micro-environment where you need it.

[Maury Raycroft:]

Yes. Cool. It's pretty interesting. And so basically you're using much less interferon and you're getting the interferon into the tumor microenvironment.

[Francois Lebel:]

Absolutely, plus, possibly you remember that the antibody though can be - in the current one we're targeting CD20, the following one is GRP94. But what we've been licensed here is the access to other possible target here. And also as you probably will know, interferons come in various, flavor or subtypes, alpha interferon for example has in excess of 23 subtypes. So, we have a lot of flexibility with this platform.

[Maury Raycroft:]

Got it. Okay. Thank you very much.

[Joe Turgeon:]

Thanks, Maury. I'm showing no further questions at this time. I would now like to turn the conference back to Joe Turgeon.

[Joe Turgeon:]

I appreciate everybody's interest. Thank you for joining the call and I look forward to talking to you in the future. Thank you very much, operator.

[Operator:]

Ladies and gentlemen, this concludes today's conference. Thank you for your participation and have a wonderful day. You may all disconnect.