Spectrum Pharmaceuticals, Inc.
Q2 2019 Earnings Call Transcript

Published: 9 Aug 2019

[Operator:]

Good day ladies and gentlemen, and welcome to the Spectrum Pharmaceuticals Second 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. Mr. Kapoor, you may begin.

[Shiv Kapoor:]

Thanks. Good afternoon to everyone. Thank you for joining us today for Spectrum's second 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 progress from our CMO, Dr. Francois Lebel.Before we get started, I'd like everyone to refer to 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 be making 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.With that, let me hand the call over to Joe.

[Joe Turgeon:]

Thank you, Shiv and hello to everybody on the call. I appreciate your interest in Spectrum. I'm really excited to talk to you today. We made significant progress in the first half of this year, as we strategically shifted from small niche products to higher value targets. Our focus is on our late stage oncology assets poziotinib and ROLONTIS, both of which have major milestones in the next few months. For poziotinib we've completed enrollment of both cohort 1 and cohort 2, either of which could be used as pivotal studies in a regulatory filing.We are looking forward to the top line results of cohort 1 in the fourth quarter of this year. Results from cohort 2 are expected by mid-2020. We have a mutation strategy poziotinib and new scientific information is guiding the expansion of the poziotinib program. Based on preclinical data, we expanded our mutation strategy beyond exon 20 and into the treatment of osimertinib and atypical mutations. There is significant unmet medical need in those areas and poziotinib may be uniquely suited to offer patients much needed solutions. We're letting the science guide our development programs and entering these new areas and exploring further the role of pozi in these difficult to treat mutations.Regarding ROLONTIS, our late stage asset to use in chemotherapy-induced neutropenia, we recently had a productive meeting with the FDA and plan to submit the BLA in the fourth quarter. I want to remind you that we have very strong efficacy and safety data coming out of two large Phase III trials. If approved, this product will compete in a multibillion dollar market that I and many members of our management team have a deep expertise in. We look forward to successful submission and its ultimate approval.In Q2 we also completed the acquisition of fusion interferon technology platform or FIT, which places us in the immuno-oncology space. This deal is consistent with our commitment to focus on innovative oncology products in areas of high unmet medical needs. Overall, Spectrum is in a great position. We're on the cutting edge of science. We have a promising growing pipeline with significant near term milestones. We are well capitalized and we have a strong team. We are focused on delivering on the goals we've set and I look forward to continuing the momentum into the second half of the year.With that I'm going to turn over the call to our CFO, Kurt Gustafson to go over the financials.

[Kurt Gustafson:]

Thanks, Joe. I'll begin with some comments on continuing operations. Our SG&A expense for the second quarter of 2019 was 17.2 million and R&D expense was 17 million. R&D expense included a onetime charge for the licensing of immune gene FIT technology of 2.8 million.Our net loss from continuing operations was 28.8 million. However, on a non-GAAP basis, which primarily backs out stock compensation costs, as well as the licensing fee paid to immune gene, our loss was 25.2 million.The income from discontinued operations was 388,000 and represents various items recorded in the second quarter that are related to the commercial business that was sold to Acrotech on March 1.As we look towards the second half of the year, I would expect that our SG&A expenses would stay similar to current levels. However, we do expect R&D expenses to increase as we expand the poziotinib clinical development program and invest in our commercial manufacturing for both poziotinib and ROLONTIS.We ended the quarter with 282 million in cash plus marketable securities. Based on our increased cash balance, we started investing in certain short-term debt securities, which is why you'll see our marketable securities has grown this quarter. That total of 160 million in marketable securities represents these debt instruments, as well as our equity position in CASI.The sale of our commercial business brought in a significant amount of cash to the company. And with 282 million in total liquidity, we have plenty of runway to continue the development and commercialization of our late stage assets.With that, let me now hand the call of Dr. Francois to cover updates on our clinical programs.

[Francois Lebel:]

Thanks, Kurt. Hello, everyone. I'm going to start by providing an update on our late stage asset poziotinib. The pozi development program is focused on investigating the treatment of exon 20 insertion mutation in non-small-cell lung cancer. Exon 20 mutations are among the most difficult to treat and currently have no FDA approved therapy. These patients and their physicians are in need of effective treatment options. As Joe mentioned, we expect the top line results from cohort 1 in the fourth quarter. This cohort is evaluating patients with previously treated EGFR exon 20 insertion mutations. Cohort 2, which is evaluating pozi in previously treated HER2 patients reached full enrollment in Q2.This was an exciting milestone as it happened six months ahead of schedule and speaks to the clear unmet medical needs. We are pleased with the enrollment in cohorts 3 and 4, looking at first line treatment and both EGFR and HER2 patients with exon 20 insertion mutation. We recently announced three additional cohorts in the ZENITH20 trial that are actively recruiting patients. Cohort 5 includes previously treated or treatment naive non-small-cell lung cancer patient with EGFR or Her2 exon 20 insertion mutation. We open this cohort because there's been numerous requests to enter our fully enrolled cohorts 1 and 2. This cohort helps us address these requests while continuing to generate useful data.Cohort 6 includes non-small-cell lung cancer patient whose tumor progress while on treatment with first-line osimertinib and develop new EGFR mutations. Recent preclinical data suggests that poziotinib may be active against many of these EGFR dependent resistant mechanism. Cohort 7 includes non-small-cell lung cancer patients with a variety of less common mutation in EGFR and HER2 exons 18-21, or the extra cellular or transmembrane domains for which there is no effective therapy. And we have strong in vitro evidence of poziotinib activity. By the way, you will see the preclinical data supporting cohorts 6 and 7 at the upcoming World Lung meeting in Barcelona, presented by Dr. Heymach's group from MD Anderson. All three new cohorts are actively recruiting.Now, shifting to ROLONTIS, at ASCO, we presented a poster integrating the data from both of our pivotal phase three ROLONTIS clinical trials, which included a total of 643 patients. The integrated analysis of efficiency and safety was consistent with results from the individual studies demonstrating that ROLONTIS was non-inferior to pegfilgrastim in the reduction of duration of severe neutropenia. Regarding our BLA file, we recently had a productive meeting with the FDA to further discuss their expectation around module three, which is the module focused on manufacturing. Based on the outcome of that meeting, we expect to submit the BLA in the fourth quarter of this year.Now, let me shift to the work on the newly acquired FIT platform. This is a welcome addition to our pipeline as we enter the immuno-oncology space, an area that I know well. The FIT platform creates a new class of biotherapeutics engineered by fusing interferon alpha with a monoclonal antibody targeting a specific invalidated tumor antigen. Interferons are very potent cytokines that are well established as cancer therapeutics, but have historically been associated with significant systemic side effects. Preclinical data suggest that the FIT technology has the potential to maintain efficiency and minimize toxicity. As you can see, we have a growing and well balanced pipeline. The team is the executing on our goals and energized about our path forward.Now, I'll turn it back to Joe.

[Joe Turgeon:]

Thank you, Dr. Francois. We made a lot of progress in the second quarter. We have a growing oncology pipeline with important near term milestones for both poziotinib and ROLONTIs and have a promising novel immune-oncology platform. We look forward to major catalysts in the coming months.And with that, I'd like to open up the line to operator to questions.

[Operator:]

Thank you. [Operator Instructions] Our first question comes from Alethia Young with Cantor Fitzgerald. Your line is now open.

[Unidentified Analyst:]

Hi, this is Emma on for Alethia. For the new expansion cohort 5, could you just walk us through the dosing regimen and whether there are any differences between the cohorts 1 and 2?

[Joe Turgeon:]

Yeah, hey, Emma, why don't we have Dr, Francois walk you through that?

[Francois Lebel:]

So the main – cohorts 1 and 2 or 5?

[Joe Turgeon:]

In 5.

[Kurt Gustafson:]

On 5, yeah.

[Francois Lebel:]

So cohort 5 – the primary reason why we have cohort 5 is as I've indicated, we have received numerous requests for a compassionate use. Investigators have patient with exon 20 mutations, and they want to enroll them in cohort 1and 2 and those studies or cohorts are closed. So we had to have a mechanism to provide access under controlled condition. And that is exactly the main reason why we're doing this. It will give us additional data that is always useful for any drone when you go to market. The more data you add the better at it.

[Unidentified Analyst:]

But I guess specifically on the dosing, is the dosing regimen the same as cohorts 1 and 2.

[Francois Lebel:]

Yeah. Sorry Alethia. So the dosing regimen, we are exploring three dose level, we're going to be randomizing patients to 10 milligram, 12 milligram and 16 milligram per day and we are allowing patients that would be started on lower dose to potentially escalate if ever there would be signs of progression.

[Unidentified Analyst:]

Thanks, that's helpful.

[Operator:]

Thank you. And our next question comes from Maury Raycroft with Jefferies. Your line is now open.

[Maury Raycroft:]

Hi, everyone. Good afternoon and congrats on the progress. And thanks for taking my questions. So my first question is on ROLONTIS. I'm just wondering if you can comment on any gating factors remaining prior to submitting the BLA.

[Joe Turgeon:]

Yeah. Hi, Mario. How you doing? This is Joe. Good to hear from you. Listen, we are aligned with the FDA. We had our meeting, we got aligned. We're being thorough, we're being deliberate and we're going to filing in the fourth quarter as we said. The questions that we had answered, we're in module three, which is in the SCMC section only. And again, we're being like I said, thorough and deliberate and plan on filing this in the fourth quarter.

[Maury Raycroft:]

Got it, okay. And then I was wondering for cohort 6 and 7 that were added to the pozi study, just wondering if those are independently powered similarly to cohorts 1 through 4? And do you have any thoughts on whether cohorts 6 and 7 could have an accelerated development path?

[Francois Lebel:]

Yeah, good question. So we have not fully powered those studies, the cohorts 5, 6 and 7 are exploratory in nature, that gives us a little more flexibility. And there is no target endpoint that is defined here. We're trying to translate exciting data that we've seen preclinically, as I mentioned, and we want to see if it translates clinically. If it does, obviously, we would potentially modify those cohorts or do additional studies. But we need to first confirm whether or not we can see the same signal in patients.

[Maury Raycroft:]

Got it, understood. Thanks for taking my questions. I'll hop back in the queue.

[Joe Turgeon:]

Thanks, Maury.

[Francois Lebel:]

Thanks, Maury.

[Operator:]

Thank you. And our next question comes from Ed White with HC Wainwright. Your line is now open.

[Ed White:]

Hi, guys, thanks for taking my question. So just a question on cohort 5, since this is similar to cohorts 1 and 2, does this slow down the launch timeline? Do you think the FDA is going to want to look at this data before looking at cohorts 1 and 2 for approval or it has no impact?

[Joe Turgeon:]

Sure Ed. So the answer is – the short answer is no, we don't think it's going to delay us at all, if anything, this will be up. So remember cohorts 1 to 4 actually, 1, 2, 3, 4 are – cohorts 1 and 2 are fully enrolled, 3 and 4 are very nicely enrolling. And when they complete, then these patients could also go in cohort 5. So it's just additional data that we're gathering here. There is no requirement in any kind of way; they're independent of the pivotal trials that were cohorts 1 to 4. So this would be simply additional data that would provide additional safety information, et cetera. It's not it's not part of requests to the FDA. We're doing this on our own.

[Ed White:]

Okay, great. Thanks Francois. And now just a question on post the TAK-788 data at ASCO, I just wanted to get your thoughts on what that data versus the pozi data – if both of them hold up, what this could mean for the market. So maybe this is for Tom. And also what the market is going to look like, and then any thoughts on the discontinuations 788 due to adverse events, which was higher than poziotinib.

[Tom Riga:]

Hey, Ed its Tom. We've obviously looked at that data in detail. I think it's pretty early. It looks like that study is starting. I think our position, we feel really strong about – with the data readout and Q4 and is well add in the development lifecycle with poziotinib. So we'll have to see what that market looks like. I think what it really says is that there is real unmet need for this patient population, as more and more compounds come into the fold. I think it speaks to the solutions that patients need and we're pleased to be at the forefront of that.

[Ed White:]

Great, thanks, Tom. And then perhaps just the last question, just for – a question on the basket study. Can you give us any update there as for the – maybe the number of indications that you're looking for? Which indications – the size of this study or are you going to focus on second or third line or any other information you give us would be helpful? Thank you.

[Francois Lebel:]

Right, I think the – unfortunately, the only information I can give you is that we absolutely intend to have a basket study in the second half of the year. And we are currently working – communicating with the FDA as to the exact nature of the basket. But I can't today give you more information. Obviously, we'll give you more information when things are finalized.

[Ed White:]

Okay, no problem. Thanks, Francois.

[Francois Lebel:]

Sure.

[Joe Turgeon:]

Thanks, Ed.

[Operator:]

Thank you again. And our next question comes from Michael Schmidt with Guggenheim Securities. Your line is now open.

[Charles Zhu:]

Hey, guys, this is Charles Zhu on from Michael Schmidt. Thanks for taking the questions and congrats on all the progress.

[Joe Turgeon:]

Hey, Charles.

[Charles Zhu:]

Hello. First on ZENITH20, how would you characterize the enrollment timeline of cohorts 3 and 4? Can we expect similar timelines or dynamics as we've seen with cohorts 1 and 2? And one angle I'm coming from is if you look at some of these other trials in lung cancer evaluating TKIs even as they get to the more frontline setting, we're still seeing a lot of patients who come up with platinum based chemotherapy. Thanks.

[Francois Lebel:]

Right, so I can't give you a large amount of details there, other than to say it's recruiting nicely according to our expectation. I agree with you that we're aware that first-line studies like that might be slightly more difficult to recruit, but so far, it's not been an issue. And we're progressing well as expected. So unfortunately, I can't really tell you much more than that. Did you request timeline or?

[Charles Zhu:]

Yeah.

[Francois Lebel:]

Yeah and Charles, the only thing we can say that we're very pleased with the enrollment to date and we continue to enroll is what I can tell you.

[Charles Zhu:]

Okay, got it. And I think this was the partially voiced over before. So apologies in advance, if I'm asking you to repeat yourself, but regarding cohort 5, it makes sense that you're providing pozi access for patients that like would normally have enrolled in cohorts 1 and 2, but can no longer do so? What are the potential implications for cohorts 3 and 4? Is there any kind of potential where like a patient that would have gone on 3 might go on 5 now instead? And would that have any like potential delay for 3 and 4 or would you be able to supplement like – in a data set from 3 and 4 with like a partial data set from 5?

[Francois Lebel:]

Yeah, there's no conflict at all. So we have to finish enrolling cohorts 3 and 4 and just like cohort 1 and 2, when they're fully enrolled, then the patient will be eligible for cohort 5. So they're not competing at all with one another.

[Charles Zhu:]

Got it, that makes sense. And then last question from me regarding ROLONTIS, just a general question. How do you see the dynamics or the market size shifting for G-CSFs as new lapse biosimilars continue their uptick? Thank you.

[Joe Turgeon:]

Yeah, I'm going to let Tom give you some color on that, what I will tell you is this Charles, in all of our modeling, we fully expected and modeled having multiple biosimilars on the market when we came to market. So this is not surprising to us or anything new. I'll tell you that. But Tom, why don't you speak to the market?

[Tom Riga:]

Yeah, Charles, we're seeing rational pricing in the marketplace. It's not behaving like a typical generic marketplace as we would have predicted and as we look at the dynamics and seeing how it's playing out; it makes us more excited to compete in this space. We think having a novel solution entering the marketplace, with the backgrounds of our leadership team we'll be able to compete in that in that market. We're looking forward to getting this filed in here in the fourth quarter and having the opportunity to enter that ring.

[Charles Zhu:]

Sounds good and thanks again for taking the questions and for your time today.

[Joe Turgeon:]

Thank you, Charles.

[Operator:]

Thank you. And our next question comes from Harshita Polishetty with B. Riley FBR.

[Harshita Polishetty:]

Hi, good afternoon everyone.

[Joe Turgeon:]

Hey, Harshita.

[Harshita Polishetty:]

Hey, Joe. Congrats on the progress and thank you for taking my question. I guess I wanted to ask about pozi and other tumor types. I guess I'd already touched this with regards to the backend study. And I know you're not able to provide color on trial size and/or patient populations. But correct me if I'm wrong, but you're also looking at combinations, right? Are you able to provide any color on how you're thinking about potential combination?

[Francois Lebel:]

Yeah, you're correct. We plan to do – start a combo study in the second half as well. The only thing I can tell you in terms of the choice of the drugs they're going to be combined is that we're – it's going to be a rational combination. In other words that – where you would expect that to either preclinical data supporting the combination or that you have reason to believe that mechanistically those two drugs would work well together. The other thing is that you always have to look for in combining drugs, you want as much as possible not to have overlapping toxicity. So we're careful in our choice. But we're still on track to move forward with that.

[Harshita Polishetty:]

Right, yeah. That makes sense. Thank you for color.

[Francois Lebel:]

Sure.

[Joe Turgeon:]

Thank you, Harshita.

[Operator:]

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

[Joe Turgeon:]

Yes, thank you, operator. I appreciate everybody's interest. And have a good day everyone.

[Operator:]

Ladies and gentlemen, thank you for participating in today's conference. This does conclude today's program and you may all disconnect. Everyone have a wonderful day.