Spectrum Pharmaceuticals, Inc.
Q4 2019 Earnings Call Transcript

Published: 28 Feb 2020

[Operator:]

Ladies and gentlemen, thank you for standing by, and welcome to the Spectrum Pharmaceuticals 4Q 2019 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions]I would now like to hand the conference over to your speaker today, Mr. Shiv Kapoor, Vice President of Strategic Planning and Investor Relations. Thank you. Please go ahead, sir.

[Shiv Kapoor:]

Thanks. Good afternoon to everyone. Thank you for joining us today for Spectrum Pharmaceutical’s fourth quarter and full year 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 program from our CMO, Dr. Francois Lebel.Before we get started, I would like everyone to please 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 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 Joe Turgeon, CEO of Spectrum.

[Joseph Turgeon:]

Thank you, Shiv. Good afternoon and thank you for joining us today. I appreciate everybody's interest in Spectrum. We remain highly focused on our late-stage assets, ROLONTIS and poziotinib. So let me begin with updates on these programs.ROLONTIS is our late stage drug being developed for the treatment of chemotherapy-induced neutropenia. We submitted our BLA in October of 2019 and it was accepted for filing with the PDUFA date of October 22, 2020. If approved, ROLONTIS could be the first novel granulocyte-colony stimulating factor available to healthcare providers in over 15 years. We have confidence in the future of ROLONTIS and are looking forward to potentially competing in this multibillion dollar market.Our launch preparations for ROLONTIS are actively underway. As the PDUFA date approaches, we will accelerate our commercial build out and have already put key leadership personnel in place. Our plan is to launch with a lean yet effective commercial infrastructure to maximize the impact of ROLONTIS. We are closely monitoring the evolving market dynamics and continue to believe that launching a novel asset will benefit patients, our customers and our shareholders. Competing in this market is a significant opportunity for our company and we will be ready to go.Our other late-stage clinical asset, poziotinib targets hard to treat mutations in lung cancer. Results from the first cohort of the ZENITH20 trial which were announced in December, were disappointing. While the response rate of Cohort 1 in this trial was lower than we expected, the positive signals that we observed provide support for the continued clinical evaluation of poziotinib in this patient population with significant unmet medical need.Dr. Lebel will give you a comprehensive update of the current status of the Poziotinib clinical program later on the call. Spectrum's focus is on the development of two late-stage assets and expanding the pipeline. Last year we made significant progress in transitioning the company and now have completed the shift from small niche products to high-volume targets through the divesture of our legacy assets, advances in our product development pipeline, and the acquisition of the fifth platform.As I think about 2020 we are well funded, we're preparing the launch of product into the biggest market in the company's history. We have multiple beta catalysts and we have the development talent to realize the promise of our current assets. Additionally, we are seeking new business development opportunities that will complement our pipeline.With that, I'm going to turn it over to Kurt to cover the financials.

[Kurt Gustafson:]

Thanks, Joe. Let's start with a review of our continuing operations. Our SG&A expense for the fourth quarter of 2019 was $15.1 million versus $16.6 million in the previous year. R&D expense was $23.3 million versus $29.9 million in the fourth quarter of 2018. Our net loss for the quarter from continuing operations was $40.2 million versus $53.1 million in the comparable period of 2018.On a non-GAAP basis, which primarily backs out stock compensation costs or loss for the quarter was $33.4 million. As we prepare for the launch of ROLONTIS we would expect to see an increase in our SG&A expense in the second half of the year. And while we have the key leadership positions in our commercial organization already on board, we will be hiring our sales team in the back half of this year.We ended the quarter with $224 million in cash plus marketable securities. This is down $28 million from the prior quarter. This cash balance gives us plenty of run way to continue the developments and commercialization of our late-stage assets.And with that, let me now hand the call over to François to cover updates on our clinical programs.

[Francois Lebel:]

Thanks Kurt. Hello everyone. I'm going to start by providing an update regarding our late-stage asset, ROLONTIS, which is being actively reviewed by the FDA. ROLONTIS is a novel, long-acting granulocyte-colony stimulating factor seeking an indication for the treatment of neutropenia in patients receiving myelosuppressive cancer chemotherapy.In October of last year, we submitted an updated BLA to the FDA which the agency accepted for review with a PDUFA date of October 24, 2020. We are working closely with the FDA as it conducts its review of our BLA. The BLA is based on robust clinical data from two large pivotal, randomized, controlled trials. In both studies ROLONTIS met the pre-specified endpoint of non-inferiority in duration of severe neutropenia and met all secondary endpoints. The safety profile was similar to pegfilgrastim.In October last year, we presented the Phase 3 data for ROLONTIS at the ASCO, Supportive Care in Oncology Symposium in San Francisco. These two trials together enrolled 643 early stage breast cancer patients. The analysis provided integrated efficacy and safety data that were consistent with results from the individual studies.Let me remind you that the ROLONTIS development program continues. I am pleased that an abstract with preclinical data looking at same day dosing in a rodent model has been accepted for presentation at the upcoming AACR in April.Now shifting gears, we are continuing to investigate poziotinib for the treatment of exon 20 insertion mutation in non-small cell lung cancer. Exon 20 insertion mutations are among the most difficult to treat. These patients and their physicians are in search of the first effective treatment option as there are no approved therapies for this indication.ZENITH20 is a comprehensive multi-cohort study evaluating a broad range of lung cancer patients with specific mutation. As we announced in December, the topline results from ZENITH20 Cohort 1, evaluating pozi in 115 previously treated EGFR patients with exon 20 insertion mutation, did not achieve the primary endpoint of objective response rate. Patients in this cohort received 16 mg per day of poziotinib.The intensive treatment analysis showed that 17 patients had a formal resist response and 62 patients had stable disease for a 68.7% disease control. The confirmed objective response rate or ORR was 14.8. The median duration of response was a noteworthy 7.4 months. The safety profile was in line with the type of adverse events seen with other second generation EGFR tyrosine kinase inhibitors.While the study did not meet the primary endpoint, the data showed that the drug has real biologic activity that merits further investigation. The analysis shows that about two thirds of the patients had temporary dose interruption and two thirds had dose reductions. These data also indicate that patients who stayed on therapy had a better response rate. So we are examining ways to enhance the ability of patients to stay on their assigned dose for longer duration.We will be providing additional insight at a podium presentation at the 11th Annual Congress on Pulmonology & Respiratory Medicine in Amsterdam on March 18. Following the presentation, we plan to provide and update to investors on the program.In summary, drug development is rarely a straight line. We are applying the learnings from Cohort 1 and taking decisive action going forward. Let me remind you that ZENITH20 is a study with multiple independent cohorts. Cohort 2 has been fully enrolled and is evaluating pozi in previously treated HER2 patients. We expect topline results will be available for this cohort midyear.Cohort 3 is nearly full enrolment and we expect results from this cohort by the end of the year. We look forward to sharing more information on this program after our presentation in Amsterdam.Now, I'll turn it back to Joe.

[Joseph Turgeon:]

Thank you, Dr. Francois. And before I shift to the Q&A, I have something special to talk about. I'd like to take the opportunity to thank Shiv Kapoor for his many years of dedicated service to Spectrum. Shiv is going to be leaving Spectrum to pursue some entrepreneurial activities and he has provided great contribution to this organization and I've got to tell you, he has been a great friend, he is a great person, a great dad, husband, and a lot of fun to be around besides being very knowledgeable. He is going to be missed and we wish you continued success in all your future endeavors Shiv and I really appreciate all you've done and personally thank you.So with that, let's open the line for questions.

[Operator:]

[Operator Instructions] And your first question comes from Maury Raycroft with Jefferies.

[Joseph Turgeon:]

Hi Maury.

[Unidentified Analyst:]

Hi this is Francine [ph] on for Maury. So the question is regarding after the ZENITH20 Cohort 1 data, have you had a chance to assess how dose reductions may have impacted the overall response rate? And since the readout, have you shortened the list of what the various doses may have contributed?

[Joseph Turgeon:]

Yes, let me first start by saying that, and on the 18th when we have – after the presentation, the data were presented in great detail from Cohort 1 and then after what we'll do is, we will have a - an Investor Call, we will go over the data itself and also our strategy moving forward. Dr. Francois, I don’t know if you'd like to add anything to that.

[Francois Lebel:]

Yes well, a good question. As I mentioned in my formal remarks, the patients who were able to stay on the drug longer had a better response and then the details around that will be presented In Amsterdam at the Lung Meeting. So yes, unfortunately you'll have to wait a little bit more, a few weeks before you get the full story.

[Unidentified Analyst:]

I see. And for the second one is, what is the bar for success in HER2 exon 20 non-small cell lung cancer? And how much read through is there from Cohort 1 and if there is any plans to make changes to increase the chances of success?

[Joseph Turgeon:]

You are breaking up a little bit.

[Francois Lebel:]

Yes, what was the question, we couldn’t hear them, especially the first part of the question, we couldn’t hear it.

[Unidentified Analyst:]

So what is the bar for success in HER2 exon 20, the Cohort and how much read through is there from Cohort 1? And if there are any plans or changes to increase the chances of success?

[Joseph Turgeon:]

So, as you know, we have given you the result of the study in terms of response rate of 14.8%. We have not disclosed publicly what the bar was. As you know, there are many other drugs in development and we think it is a result of our negotiation with the FDA and we are not disclosing publicly that. And also we have other cohorts that are maturing right now, so that's confidential [indiscernible]. So that was the part for the bar, I'm sorry, was there another component to your question?

[Unidentified Analyst:]

So basically, you have to make any changes to increase chances of success in the cohort 2, based on the cohort 1?

[Francois Lebel:]

Well, cohort 2 is fully enrolled okay? So we are just awaiting the maturing of that data. By midyear we will be to show you exactly that that data says. Again, we cannot tell you what the outcome is until we see it. It is a different patient population, so we just don’t know that. As exon 20 and HER2 refractory and so there is nothing we can do I'll remind you that Cohort 3 is almost fully enrolled and we will have that data late this year. So there is really nothing we can do about it. Again, on that call we have in the 18, I'll remind you, besides the data we will go through our strategy and what we can do going forward.

[Unidentified Analyst:]

Thank you.

[Francois Lebel:]

You are welcome.

[Operator:]

And our next question comes from Mayank Mamtani from B. Riley.

[Unidentified Analyst:]

Hi guys, good afternoon. This is [indiscernible] on for Mayank. I appreciate the updates. Just a couple of brief questions from me. First of all regarding the launch preparations, can you discuss kind of any of the strategy you've guided to in terms of – given the fact it will be a lean sales force, where you'll be targeting, et cetera?

[Joseph Turgeon:]

Yes, Tom, why don’t you take that?

[Thomas Riga:]

Yes, very much appreciate the questions and our preparations are well underway and we are really enthusiastic about the opportunity to launch into this market. And I think the platform for launch really comes down to four things and the first one you hit on was just customer focus. I think how we target and segment this market is really contingent upon our success. Each of the segments of this phase behave and are motivated by different things. So we are spending a lot of times studying the different segments of the business and how we will go about approaching the market in that light.And the second thing that we are spending a good time looking at is patient access, whether that leads to the various stakeholders or healthcare costs for patients are always a concern and having a patient access program that enables support for patients is really important component to launch.I think thirdly is supply and we are confident in the supply that we'll bring to the market. And fourth is really the customer connectivity that the field force that we're putting on the field will inevitably have. So I think in summary we are feeling really good about our proposition of competing in a very large market and are anxiously awaiting opportunity to do so.

[Unidentified Analyst:]

Great, I appreciate the color. And may be another question regarding ROLONTIS, just any additional, sort of incremental color you can provide on the abstract at AACR and how do you think about the implications in the clinic for same day dosing?

[Joseph Turgeon:]

Yes, listen, the abstract has been accepted. We cannot go into the data. There is an embargo on that. You can't really talk about that. So, what just – the abstract has been accepted and at that time we can discuss the data that is in there.

[Unidentified Analyst:]

Okay, understood and looking forward to the presentation on the 18. Thank you for taking my question.

[Joseph Turgeon:]

You are welcome, thank you.

[Operator:]

And our next question comes from Alethia Young from Cantor Fitzgerald.

[Joseph Turgeon:]

Hey Alethia.

[Unidentified Analyst:]

Hi guys, this is [indiscernible] on for Alethia. Just a couple of questions from me that has to do first is, I'm kind of curious, have you met with FDA to sort of the review the Cohort 1 data and discuss the path forward? And then how is the enrollment going [technical difficulty] the Cohort 5 and [indiscernible]?

[Francois Lebel:]

So Alethia, this is Francois going to answer the question. So we have not disclosed any communication with the FDA. There is interaction on an ongoing basis and as to the enrollment we have - the enrollment we are satisfied with the enrollment and actually we sort of stated previously that in spite of missing the primary endpoint in Cohort 1, enrollment continues to be very strong and requests for drug continues to be very strong. So investigators, clinicians continue to be very interested in dosing patients.They clearly remained excited in spite of the primary endpoints, all investigators that we've shown the waterfall plot and as you've seen it, it remained very convinced that there is real activity there.

[Unidentified Analyst:]

Okay, got it. Thank you.

[Francois Lebel:]

Thank you.

[Operator:]

And our next question comes from Ed White of HC Wainwright.

[Joseph Turgeon:]

Hello Ed.

[Ed White:]

Hi guys, thanks for taking my questions, and before I ask, I just want to thank Shiv as well for all the years of help that he has given me. I really appreciate it and I wish you a lot of success in the future.

[Shiv Kapoor:]

Thanks Ed.

[Ed White:]

You're welcome. So just a question on poziotinib, the basket trial was initiated at M.D. Anderson, is this trial going to continue or has there been any change to the status of that trial?

[Francois Lebel:]

Yes you are absolutely correct and the basket trial continues, obviously our emphasis is on the pivotal aspect of the three cohorts and our lung cancer trial, but we absolutely continue and are interested in pursuing basket study.

[Ed White:]

Okay, thanks. And then just on, you had mentioned Cohorts 2 and 3, is there any update on Cohort 4?

[Francois Lebel:]

It continues to enroll. I mean the reason we only mentioned Cohort 2 and 3 is because simply to remind you, Cohort 2 is fully enrolled, and as you know, the Cohort 2 was that 16 mg, Cohort 3 and 4 are both at 16 mg as well. And Cohort 3 is nearly completely enrolled and Cohort 4 is first line HER2 is not the genetics of that are not in the primary panel that clinician do it with their patients, so therefore it takes a little longer to recruit that Cohort, but it continues to enroll well.

[Ed White:]

Okay, thanks. And then just you didn’t mention the fifth platform. I know we are expecting enrollment of 20 patients in the Phase 1 trial and non-Hodgkin's lymphoma, I was just wondering if you could give any update on the status of that trial?

[Francois Lebel:]

Yes, the status has not changed. We continue to work very closely with the investigator and evolve and the PR being at UCLA, Dr. Timmerman. So we continue to review data and look at the data with him to make sure we have a full understanding of the platform and we are working very aggressively with them to restart.You know, there was no clinical earlier, in the prior company had run out of funds and there was no regulatory or clinical reads and to delay enrollment and we are simply going through the regulatory process of reactivating the trial and we'll have an update for you later in the year as to what to expect.

[Ed White:]

Okay, thanks, Francois. And Kurt, maybe just a question for you, and I thank you for the SG&A guidance commentary. I am just wondering if you can add any comments on SG&A, excuse me, R&D expense in 2020?

[Kurt Gustafson:]

Yes, Ed. At this point we're not giving any specific guidance on R&D expense. A lot of this is a function of when we buy material, our accounting practice is to as we buy pre-commercial inventory, we extend that as R&D expense. So I don’t have any specific guidance on that for you, but I think you will agree that ending the year $224 million in cash gives us plenty of runway to continue the development program and the commercialization of the launches.

[Ed White:]

Yes that was my next quarter, if you could give any guidance on how long that cash will last, what do you think you are on, I guess?

[Kurt Gustafson:]

The only guidance I would give you Ed is, so the ending balance is $224 million we burned $28 million in the quarter. If you take a look at the last couple of quarters we're in that sort of $30 million range. So we do expect SG&A expense to increase a little bit in the second half of this year, but I think if you take a look at the trends, our balance should provide us plenty of runway.

[Ed White:]

Okay, thanks Kurt.

[Kurt Gustafson:]

Sure.

[Operator:]

And our next question comes from Michael Schmidt of Guggenheim.

[Unidentified Analyst:]

Hey guys, this is Charles on for Michael Schmidt and thanks for taking the questions. One quick one here, to what degree would you say that some of this dose interruption or the learnings from the dose reduction from Cohort 1 might be potentially applied to ongoing, I guess, Cohorts that are not quite yet mature, such as 3 or 4 for example?

[Francois Lebel:]

Yes, very good question right out there. But it is not Michael right? You said it is Charles [indiscernible]. Okay, terrific. So it is like I said. There is and you know I cannot really give you that much details today because it is going to be presented at Amsterdam. But what we noted is clearly that patient, it is key that patients have to be kept on drug dose interruption or dose reduction may impact the response rate. So we are looking very aggressively to improve the ability to keep the patient on the drug and in Amsterdam we will disclose what we have in mind here, as well as provide the data so that you can really seen the correlation between if a patient was at drug interruption or not.I just want to clarify here that drug interruption means temporary stopping the drug, for example in adverse event and it is not permanent interruption of the drug. We had disclosed previously that a permanent drug related, permanent drug discontinuation once of the order of 10%. What we are talking about here is short interruption in dosing for allowing and helping the patient to recover from an AE and to get back on the drug and they continue. So hopefully that answers you.

[Unidentified Analyst:]

Great, that's helpful, thanks. And I might have missed this one a bit earlier on ROLONTIS and the Neulasta long-acting G-CSF market, but how do you see the trajectory of unit price or overall market opportunity erosion continuing for this market? And I guess to a degrees, would you expect such trends from other markets such as [indiscernible] or Remicade to kind of repeat within this Neulasta market?

[Joseph Turgeon:]

Tom, do you want to take that?

[Thomas Riga:]

Yes, I'm Tom. We're watching this pretty closely. So I think the way to think about it is, if you look at Amgen's average selling price, the biosimilar pricing is in the range between 5% and 13% decline off of the average selling price. So you do see market erosion, but it is behaving more like a competitive branded space than that of a generic. So I think when you are looking at this market today it is just north of $3 million where prior to biosimilar entrants it was sitting at 4. So there definitely is erosion.But we see this as the biosimilar entrants have done a few things. One, they've shown the ability to compete. They currently have north of 25% of the market and two, to date the pricing has been rational and the rate of decline is that of a competitive branded space versus that generic.So as we look at the launch trajectory of the losses in the market that we will be launching into, it will no doubt be competitive, but having a novel asset that enables you to control your own discounts, your own pricing, independent of any of the other behavior in the market certainly will be an advantage for that and our ability to compete within the space. Hope that answers your question.

[Unidentified Analyst:]

Got it, thanks.

[Operator:]

And there are no further questions at this time and I would like to hand the call back over to Mr. Joe Turgeon.

[Joseph Turgeon:]

With no further questions, I thank everybody for their interest. I again thank and wish Shiv well and I appreciate everyone's interest. That will end the call. Thank you very much.

[Operator:]

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