Spectrum Pharmaceuticals, Inc.
Q2 2018 Earnings Call Transcript

Published: 10 Aug 2018

[Operator:]

Good day, ladies and gentlemen, and welcome to Spectrum Pharmaceuticals second quarter 2018 financial results conference call. At this time, all participants are in a listen-only mode. [Operator Instructions]. Also, as a reminder, today's conference is being recorded. I would now like to turn the conference over to Spectrum Pharmaceuticals' Chief Financial Officer Kurt Gustafson.

[Kurt Gustafson:]

Thank you. And good afternoon to everyone on the call today. Thank you for joining us today for Spectrum's second quarter 2018 financial results conference call. Shiv Kapoor is not able to be with us this afternoon, so I'm stepping in. Our press release is available on our website at www.sppirx.com. Joe Turgeon, our CEO and President, will start the call today and provide an overview. This will be followed by a financial update by myself and the discussion of our operations, by our COO, Tom Riga. 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.

[Joseph Turgeon:]

Thank you, Kurt. And hello, everyone. I want to thank you for joining us today and I really appreciate your interest in Spectrum. This quarter was another very productive one. We continue to aggressively advance multiple clinical studies, which are moving us closer to our ultimate goal of delivering targeted and novel therapies for cancer patients. The second quarter was data rich with significant data milestones for our lead pipeline candidates, poziotinib and ROLONTIS. Poziotinib had significant milestones including a publication of data in Nature Medicine and a presentation of data at AACR. We also released ROLONTIS positive top line data from our second Phase III study, the RECOVER trial, and detailed data for the advanced Phase III study. I'm proud of the progress and what it could mean for cancer patients, as well as for the growth of our company. In the second half of the year, we expect to again have noteworthy progress on both poziotinib and ROLONTIS, including clinical data updates and additional regulatory insight. The poziotinib data at World Lung will be presented by the clinical team at MD Anderson on September 24 and the abstract will be available online on September 5. At the conference, MD Anderson will provide an update on the Phase II study, including an even broader data set on EGFR exon 20 mutations and, for the first time, HER2 exon 20 mutation clinical data. These will be important to help further understand the potential of poziotinib in non-small cell lung cancer. As we look at the full potential of poziotinib as a targeted therapy, we believe that its benefit goes well beyond our current focus in a previously treated lung cancer setting. Our team has developed a comprehensive strategy and we're working aggressively to broaden our clinical trial footprint. Tom will layout our thinking and our plan of action as we move forward. It's full steam ahead. As we look at ROLONTIS, we have seen compelling data this quarter from both our Phase III trials. Our team is currently working on a pre-BLA meeting with the FDA to ensure alignment in preparation for our planned Q4 BLA submission. I'm proud of the progress we're making and I'm excited about what lies ahead. Our employees are actively working to grow our company with urgency and with focus. I'd like to turn it back over to Kurt to go over the financials at this time.

[Kurt Gustafson:]

Thank you, Joe. So, total revenues for the second quarter were $24.2 million, of which $23.8 million were products sales. This quarter, we saw a decline in our EVOMELA sales. This decline was due in part to a shortage of drug that is part of the stem cell transplant treatment regimen, which reduced the total number of transplants performed in the second quarter. We also continued to see pricing pressures from the new generic entrants. However, we have maintained a premium price based on our product profile and continue to be the market leader. As I previously mentioned, we are continuing to invest in research and development and these costs grew to $21.5 million, and this trend is expected to continue. Our loss from operations was $34.3 million, but due to an unrealized gain on our marketable securities, we reported net income of $13.7 million. We ended the quarter with $174 million in cash and $95 million in marketable securities for a total of $270 million of available liquidity. Our marketable securities are made up of primarily [indiscernible 5

[Thomas Riga:]

Hey, thanks, Kurt. The second quarter was a data-rich quarter as we aggressively advanced and gained positive momentum with our two most important late stage assets, poziotinib and ROLONTIS. This advancement is a direct result of the talented people at Spectrum who are helping propel the company forward. Let's jump right into the specifics with poziotinib. Poziotinib is our late-stage pipeline product that is being studied as a targeted therapy where exon 20 insertion mutations are present in a segment of the lung cancer population. The median progression free survival of currently available TKIs is approximately two months, with an overall response rate of less than 10%. Currently available treatments simply aren't good enough. We are studying this asset in partnership with our outstanding preclinical and clinical team at MD Anderson Cancer Center. Currently, they are conducting a Phase II trial in EGFR and HER2 exon 20 mutations in previously treated non-small cell lung cancer patients. Exciting data from MD Anderson's lung cancer study was published in Nature Medicine in the second quarter. In September, MD Anderson will lead an oral presentation of updated poziotinib data at the World Conference on Lung Cancer in both EGFR and HER2 patient populations. We're looking forward to the release of the abstract on September 5 and the oral presentation on September 24. The Spectrum-sponsored multicenter trial is also well underway. We currently have approximately 40 sites up and running with several others in process. And we are pleased with the enrollment in both cohorts. Additionally, we're in the process of activating sites in Europe that will enhance access for patients around the world and will position us well for our filings outside the United States. Investigators from around the globe have been enthusiastic about participating in the trial and gaining access to poziotinib. We fully expect to enroll the first patient in Europe by the end of the year. The most recent regulatory development of our ongoing Phase II study is that we had an encouraging interaction with the FDA. Based on this discussion, we believe this study will qualify as a registrational trial. This meeting was very productive and we appreciate the agency's partnership and guidance. Regarding BTD, our belief is steadfast that poziotinib meets the criteria for breakthrough therapy designation. There is a clear unmet medical need and we believe that poziotinib demonstrates substantial improvement over existing therapies. As we move forward with our conversations with the FDA, the MD Anderson data will be the backbone of our discussions. We fully expect to gain clarity on this pathway by the end of the year. So, here's what we know about poziotinib today. We've seen very strong early data in an area of high unmet medical need. We have alignment with the agency on our Phase II trial and we have a clear shot at BTD. Now, let's talk about what's next. As we look at the full potential of poziotinib as a targeted therapy, we believe its benefits go well beyond the current focus in the previously-treated lung cancer population. Our expanded strategy will focus on three key areas. The treatment naïve lung cancer patients in the first line, combination regimens and the treatment of other solid tumors. Let me get into more detail on each of those. The first area of expansion is to explore poziotinib as a first-line therapy. We will expand our current Phase II study to include two new cohorts in the treatment naïve lung cancer population. Currently, there are no approved targeted therapies for EGFR or HER2 exon 20 mutations. Chemotherapy remains the standard of care for these patients with severe side effects and limited efficacy. And with patients with EGFR mutations, they also seem to respond poorly to immunotherapy. We have been working on this in an accelerated fashion and expect to enroll the first patient by the end of the year. The second area of expansion is to explore poziotinib in combination with other treatments. We will study poziotinib in combination with other drugs to look to improve outcomes. The focus is to identify synergistic mechanisms with non-overlapping toxicities. For example, we've initiated a dose-finding study in combination with T-DM1. While this study is in breast cancer, the overarching goal is to identify the optimal combination dose of these two agents. Additionally, there are several other logical combinations that we are exploring and have the KOL community very excited. You will see this strategy unfold as the year progresses and we will keep you updated along the way. The final area of expansion? In treatment of other solid tumors. This strategy is grounded in the prevalence data unveiled at AACR in the second quarter. These data demonstrated that HER2 exon 20 mutations are prevalent across solid tumors. MD Anderson will soon be initiating a pan-tumor cohort to their existing poziotinib trial. Additionally, we expect to initiate a Spectrum-sponsored, pan-tumor basket study soon after. The bottom line here, we have a robust strategy that will uncover poziotinib's full potential and we are committed to its development. Now, let's talk about ROLONTIS. ROLONTIS is a novel, long-acting GCSF which utilizes proprietary technology and is being studied in the treatment of chemotherapy-induced neutropenia. We had two key events for ROLONTIS in the second quarter. First, our second Phase III trial, RECOVER, met its primary efficacy endpoint. Second, detailed ROLONTIS data from the 400-patient advanced trial was presented in Vienna at MASCC. With over 600 patients in our robust Phase III program, we have demonstrated non-inferiority for DSN versus pegfilgrastim with a comparable safety profile. As we look forward, the team is diligently working to prepare for our pre-BLA meeting with the FDA in Q3. This meeting will ensure that we are in alignment with the agency as we work to our planned Q4 BLA submission. So, as I step back and take a look at what we've learned about ROLONTIS, this is what I see. We have a novel agent with strong efficacy data, comparable safety and a seasoned team with the marketplace experience to effectively compete in this multibillion-dollar market. Our operations are in full swing with positive energy. We are enthusiastic about our business and focused on the success of both poziotinib and ROLONTIS. We look forward to providing you with additional updates as the year progresses and I'll now turn the call back over to Joe.

[Joseph Turgeon:]

Thank you, Tom. And with that, operator, I'd like to open the call to questions.

[Operator:]

[Operator Instructions]. Our first question comes from the line of Adnan Butt of Guggenheim Securities. Your line is now open.

[Adnan Butt:]

Thanks for the question and nice to see all the progress. Joe, are you able to say in terms of the abstract, what level of details we should expect? Will it be more than 11 patients in the abstract? And is there going to be a difference basically in what's in the abstract versus what's in the presentation?

[Joseph Turgeon:]

Yeah, good question. How are you doing, Adnan? Couple of things. On the 5th, the abstract is coming out. It will be – there'll be more than the 11 patients. I can tell you that. I think you'll see much more data than you've seen in the past. And your second question is on the 24th, which is – we're really excited about. There will be even more data on the 24th. And I want to stress there will be both EGFR data and also, for the first time, clinical data on the HER2 patients too.

[Adnan Butt:]

Okay. That's helpful, Joe. So, whatever is reported on the 5th will be updated on the 24th. So, the two could be different.

[Joseph Turgeon:]

That's correct. There will be more robust data on the 24th even.

[Adnan Butt:]

Okay. And then, on the registration path for poziotinib, presumably those discussions are focused on the EGFR set at this time. Can you confirm that? And if that's for second line plus only, not for frontline at this time?

[Thomas Riga:]

Hey, Adnan. It's Tom. How are you? I think that our conversations with the agency are pretty broad at this point. So, as it relates to breakthrough therapy designation, our initial discussion was in regard to the EGFR population. The comments that I made in today's call regarding our Phase II study as a registration study has both EGFR and HER2 patients in that study.

[Adnan Butt:]

Thanks for that. But does that mean that both cohorts have to enroll and readout before you are able to file the drug or can you file them independently?

[Thomas Riga:]

Adnan, we're thrilled with the discussion with the agency. I don't know that we're going to give much more detail than that just to keep the conversations with the agency confidential. But we though the meeting was really positive and look forward to updating you further.

[Adnan Butt:]

Okay. Last one and I'll get back in line, promise. Presumably, you did agree to some kind of a response rate and PFS hurdle. Can you say what that is? Is that in line with your prior thinking?

[Joseph Turgeon:]

Yeah, that's a great question. I think you start with memory lane of where we are and current available treatments is less than 10%. So, obviously, this is a patient population that needs a solution because today's solutions simply aren't working. So, our conversations with the agency, obviously, do go into the statistics that are expected and we are very much aligned with the agency. And I'll leave it there.

[Adnan Butt:]

Okay. I'll get back in line. Thanks.

[Joseph Turgeon:]

Thanks.

[Thomas Riga:]

Thanks, Adnan.

[Operator:]

Thank you. [Operator Instructions]. Our next question comes from the line of Matthew Andrews of Jefferies. Your line is now open.

[Matthew Andrews:]

Hey, good afternoon. Tom and Joe, just related to breakthrough designation, are you – is the agency – have they expressed an interest in seeing any initial data from your Phase II study to support their decision on whether or not to grant it? Or at this point in time, will the MD Anderson data be sufficient for them to get to a position where they could decide whether it qualifies for BTD or not?

[Joseph Turgeon:]

Hi, Matt. We fully expect the agency will make a decision based on the MD Anderson data.

[Matthew Andrews:]

Okay, great. Can you talk about the relative importance of the agreement with MD Anderson dating back to May where you've licensed certain methods of use patents for exon 20 mutation? Why did you do it? What's the relevance of it? And any commentary there would be helpful.

[Thomas Riga:]

Hey, Matt. I'll take that one.

[Matthew Andrews:]

Sure.

[Thomas Riga:]

First, the partnership with MD Anderson has been very productive. When we think about our strategy with the drug, we're letting the science drive our investment in our activity in conjunction with the KOL community. So, what you heard today is an expanded strategy really in the mutated cancer space, right? When you think about going to the treatment naïve lung cancer population, logical combination or even in the pan tumor setting, the science is taking us there, which I think is the cornerstone of the decisions that we're making. When you think about your question as it relates to the IP agreement and, ultimately, the potential to have expanded IP specifically in the targeted mutated cancer space, the importance of that agreement is critical because it directly aligns to the scientific direction that we're taking the brand.

[Matthew Andrews:]

So, currently, the composition of matter extends to when, 2028?

[Thomas Riga:]

Correct. It's 2028 plus two or three depending on what you believe in the development timing.

[Joseph Turgeon:]

Let's call it 2030. I think that would be fair.

[Matthew Andrews:]

Okay. And then, these methods of use patents could extend it to, what, the late 2030s?

[Joseph Turgeon:]

Yeah. If granted, 2037.

[Matthew Andrews:]

Okay. And how will we learn more about that? Will it be through you or MD Anderson issuing some sort of press release on its website?

[Joseph Turgeon:]

Likely, that would be an aligned decision was with MD Anderson. I don't you've gotten to that point yet.

[Matthew Andrews:]

Yeah. Sorry, just reverting back to breakthrough designation, at this point in time, is it a matter of the data maturing? Do you have sufficient number of patients where, by later this year, with maturation, you can then go back to the agency to show them the data? Or I should say, Dr. Heymach and his team?

[Thomas Riga:]

Yeah. Matt, it's Tom again. So, we have established a really good rapport with the agency in this program on a number of levels because of the unmet need. And I've been pleased with the level of interaction and how our teams prepared. And we fully expect to have clarity on that pathway by the end of the year. But to get to your question directly, following our first kind of preliminary discussion, there was an expectation of more mature data that we would need to supply to the agency to get kind of the next steps and we're pretty comfortable that we will know before the end of the year.

[Matthew Andrews:]

Okay. All right. Great. Thank you.

[Joseph Turgeon:]

Thanks, Matt.

[Operator:]

Thank you. I'm showing no further questions at this time. I'd like to hand the call back over to Joe Turgeon for any closing remarks.

[Joseph Turgeon:]

Well, listen, thank you everybody for your questions. I really appreciate all of you for your interest. We look forward to speaking with you again next quarter. Everybody, have a great day. Thank you for your interest.

[Operator:]

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