Spectrum Pharmaceuticals, Inc.
Q4 2016 Earnings Call Transcript

Published: 9 Mar 2017

[Operator:]

Good day, ladies and gentlemen, and welcome to the Spectrum Pharmaceuticals Fourth Quarter 2016 Earnings 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 is being recorded. I would like to introduce your host for today’s conference, Mr. Shiv Kapoor, Vice President of Strategic Planning and Investor Relations. Sir, please begin.

[Shiv Kapoor:]

Thanks. Good afternoon, and thank you for joining us today for Spectrum’s fourth quarter 2016 financial results conference call. I hope you've all had a chance to review our press release which we issued earlier today. If not it’s available on our website at www.sppirx.com. I’d like to remind everyone that during this call we will be making forward-looking statements regarding future events of Spectrum Pharmaceuticals, including statements about the product sales, profits and losses, the safety, efficacy, development, timelines, and clinical results of our drug products and drug candidates that involve risks and uncertainties that could cause actual results to differ materially. These risks are described in further detail in our reports filed with the Securities and Exchange Commission. These forward-looking statements represent the company’s judgment as of the day of this conference call, March 8, 2017, and the company disclaims any intent or obligation to update these forward-looking statements. However, we may choose to update them, and if we do so, we will disseminate the updates to the investing public. For copies of today’s press release, historical press releases, 10-Ks, 10-Qs, 8-Ks and other SEC filings and other important information, please visit our website. Dr. Raj Shrotriya, our CEO will start the call today and provide you with the highlights of the fourth quarter and overall strategy. I would now like to turn the call over to Dr. Shrotriya.

[Rajesh C. Shrotriya:]

Thank you Shiv and thank you everyone for joining us this afternoon. 2016 was a significant year for Spectrum as we accomplished several strategic goals. Among others four of these include first initiating a pivotal trial for our lead drug ROLANTIS, second receiving FDA approval and successfully launching our sixth anti-cancer drug EVOMELA, third initiating a Phase 2 trial for POZIOTINIB in breast cancer patients. And fourth and most recently obtaining promising data from POZIOTINIB in lung cancer. Let me briefly talk about our two most promising drugs that we are very excited about and then I will let our team to give you a more detailed update. First, our top priority is ROLANTIS, a novel long acting GCSF. We initiated a Phase 3 study under SPA from the FDA. I am encouraged with the enrollment trends in this study. To further strengthen our regulatory package we have decided to initiate an additional smaller study. We continue to expect to file our approval in the United States next year. We believe ROLANTIS has the potential to change the face of the company because this drug has an excellent clinical profile, it targets a multibillion dollar market, and we have deep knowledge of this market space. Success of drugs like FUSILEV, FOLOTYN and EVOMELA demonstrate our team’s strong performance in competitive markets. For example EVOMELA we have achieved over 35% market share within eight months of launch. This gives me confidence in our abilities to successfully market products like ROLONTIS. Our second exciting pipeline drug is POZIOTINIB which is currently being studied in Phase 2 breast cancer patients who have failed other HER-2 directed therapies. Based on our early clinical data we believe that POZIOTINIB has the potential to be best in class among pan-HER inhibitors. Along with our interest in breast cancer we're also very excited about POZIOTINIB in non-small cell lung cancer. In December promising preclinical data was presented at the lung cancer world conference in Vienna. These data suggests that POZIOTINIB may have potential in non-small cell lung cancer patients that have genetic mutation called exon 20 insertion mutations. Patients with such tumors are generally nonsmokers, they are younger, and may not respond to either standard chemotherapy or targeted therapies. Scientists from MD Anderson Cancer Center believe that POZIOTINIB can better inhibit growth of such tumors due to its unique structure and characteristics. Early results are very encouraging and have the potential to be a transforming therapy for patients who have little or no options and poor prognosis. Soon we expect to have the first patient enrolled in a Phase 2 trial. We could have results from this trial before the year-end. I'm proud of our commercial performance and the way we have managed our expenses. We end this year well capitalized, which positions us well to further develop our strong pipeline. Joe Turgeon will soon provide you more details about our operations later in the call but before that let me hand over the call to our CFO, Mr. Kurt Gustafson to talk about our financials. Kurt?

[Kurt A. Gustafson:]

Thank you Dr. Raj and good afternoon everyone on the call. I'll just highlight a few areas on our financials here today. First, total revenues for the quarter were 35.2 million and of this product sales were 32.2 million. The sales of our PTCL franchise which drives the bulk of our revenue were 13.7 million. Our most recently launched products EVOMELA had strong demand with sales of $9.4 million. We did see some stocking at hospitals based on initial orders from a few customers which is estimated at 2 million to 3 million of the 9.4 million in reported EVOMELA sales. We're off to a great start exiting the year with a greater than 35% market share and we're pleased with the launched trajectory in this highly competitive market. As we look forward to 2017 I want to provide some perspective on our operating expenses. We've continued to lower SG&A expenses over the past two years and our quarterly SG&A expenses are now generally running below 20 million. As we previously stated we continue to expect R&D expenses to increase over the year as we increase enrollment of our clinical studies especially the pivotal trials related to ROLONTIS. Compared with GAAP loss of 17.4 million for this quarter, our non-GAAP loss which primarily excludes amortization and stock based compensation was 8.1 million. We continue to be mindful of our operating expenses to make sure we are funding only our highest priority program. I'm very pleased with the strong cash balance the company has maintained over the course of the year. The company ended the year with cash of 158 million. I would also like to point out that during the quarter, the company opportunistically repurchased $10 million face value of its convertible debentures for approximately $9 million. With that let me hand the call over to Joe.

[Joseph W. Turgeon:]

Thank you Kurt, thank you Dr. Raj, and thank you, Shiv, and most of all thank you to all of you on the call. I'm pleased with the commercial results. We've consistently demonstrated our ability to effectively compete in competitive markets. I now want to focus my comments on our existing and exciting advance stage pipeline. Let me start with the company's highest priority, ROLANTIS previously known as SPI-2012, a long acting granulocyte colony-stimulating factor or GCSF. GCSF is a glycoprotein that stimulates the growth of white blood cells. Following filgrastim in 1991 and pegfilgrastim in 2002, ROLANTIS could be the next novel drug in this market. ROLANTIS is not biosimilar. ROLANTIS is a novel molecule that has been constructed using a proprietary platform technology. In Phase 2 studies ROLANTIS has shown impressive safety and efficacy. Our Phase 2 registration plan is on track. Last year we initiated a trial in chemotherapy induced neutropenia that is primarily enrolling patients in the U.S. We expect to initiate an additional smaller Phase 3 study to strengthen our regulatory package. These trials are evaluating ROLANTIS as a treatment for chemotherapy induced neutropenia compared to pegfilgrastim just like our Phase 2 trial. I'm pleased with our current enrollment, trends, and the enrollment trajectory gives me confidence of achieving our goal of filling the ROLANTIS BLA by next year. Let me remind you, we have worldwide rights to ROLANTIS with the exception of Japan, South Korea, and China. Sales for agents using the treatment of neutropenia in the U.S. alone where more than $4 billion last year. ROLANTIS has the opportunity to change the growth trajectory of our company. We're excited to develop a novel molecule in this market. Now let me talk about POZIOTINIB. POZIOTINIB is an oral novel pan-HER inhibitor that irreversibly blocks signaling through the HER family of tyrosine-kinase receptors. This in turn could lead to an invasion of the proliferation of tumor cells that overexpress these receptors. We believe POZIOTINIB has shown the potential to be best in class pan-HER inhibitor. I want to share the excitement about studying POZIOTINIB in lung cancer. In December an oral presentation on POZIOTINIB was presented at the Lung Cancer World Conference in Vienna. Preclinical results suggest that POZIOTINIB has potential in patients with non-small cell lung cancer with EGFR exon 20 insertion mutations. Approximately 7000 patients in the U.S. have this mutation in lung cancer. Tumors with exon 20 insertion mutations have generally not been responsive to several other EGFR inhibitors. Patients generally are left with little options with a median disease progression of 1.8 months. However, due to unique structuring characteristics, POZIOTINIB is hypothesized to inhibit cell growth of EGFR exon 20 insertions. Early results from POZIOTINIB are very encouraging. The MD Anderson Cancer Center is expected to initiate a lung cancer study soon with POZIOTINIB in non-small cell lung cancer patients with EGFR exon 20 insertion mutations. This will be a 30 patient study with a primary endpoint of objective response rate according to the research criteria. We expect data from this study before the end of this year. Let me try to frame to you why we're so excited about the potential emerging data in lung cancer to POZIOTINIB out of the MD Anderson Cancer Center. We believe there's an analog presently in the market that targets the patient population with similar prevalence but a different mutation in lung cancer. That product is currently selling over $0.5 billion globally. Bottom line this drug could be significant for patients and for Spectrum. We are continuing our efforts in breast cancer because of the exciting data we have seen from this compound. POZIOTINIB has shown a strong response rate in Phase I patients with breast cancer where previously failed multiple lines of treatment including HER-2 directed therapies. We have an ongoing Phase 2 study in metastatic breast cancer patients. Our partner Hanmi is studying this drug in Korea in many mid stage studies in several tumor types including breast cancer, non-small cell lung cancer, and gastric cancer. Enrollment in Hanmi's Breast Cancer Phase 2 trial has been completed and may yield results later this year. Now onto Qapzola, our tumor activated drug for bladder cancer. We have been in discussion with the FDA for a new planned Phase 3 trial and have recently received a special protocol assessment. Compared to the previous study this study will have a two to one randomization in favor of Qapzola, you will use twice the dosage, you will evaluate approximately 70% fewer patients, and it will evaluate time to recurrence as a primary endpoint compared to recurrence at two years. Based on the SPA we are required to complete only this one trial for the NDA submission. We are pleased to have the learning’s of our previous research and recommendations from the FDA incorporated into our newly designed trial that should start enrollment later this year. In summary our pipeline has never been as exciting as it is today. Now we're getting closer and closer to the finish line. We look forward to marketing novel oncology drugs that have the potential to help patients with significant unmet need and a team that has proven success in competitive markets. Positive outcome from any of these pipeline opportunities could be transformational for the company. Again thank you for your interest in Spectrum and I'd like to give the call back to Dr. Raj Shrotriya.

[Rajesh C. Shrotriya:]

Thank you, Joe. As a development of stage oncology focused biotechnology company we have never been in a better position than today. We have a solid revenue base with six approved drugs on the market, a strong financial position, an exciting drug targeting blockbuster market in Phase 3 with a BLA plant to file next year, and potential data from an important Phase 2 study for POZIOTINIB in lung cancer later this year. With that let's open the call for questions. Operator?

[Operator:]

[Operator Instructions]. Our first question is from Laura Engle of Stonegate Capital Partners. Your line is open.

[Laura Engle:]

Good afternoon, thank you for taking my questions. Just one clarification, when we were talking about the financial result with the comment that or with the expectation that the G&A line item would be able to stay beneath that $20 million mark for the upcoming quarter with all the activity going on, I think I missed a part of the comment?

[Rajesh C. Shrotriya:]

So I’ll have Kurt to answer the question.

[Kurt A. Gustafson:]

Yes sure, we -- my comment was we've been working hard at driving down expenses at the company and in the SG&A line we have seen that number progressively come down in quarters. There's been some volatility but we're barring onetime items and we've generally been running close to or just under $20 million. We’re just trying to give you sort of a flavor of where things have been.

[Laura Engle:]

Okay, great. And then related to the reported sales for FUSILEV, it looks like it wasn't much below the prior quarter, can you just comment on what your feeling is as far as the slowing down of those sales being lined by the generic version?

[Rajesh C. Shrotriya:]

So Tom.

[Thomas J. Riga:]

Yeah, thanks for the question. Our FUSILEV sales as we've said in the past we expect the generics to continue to impact the overall sales line. It was slightly down from the third quarter and we expect that to continue but by and large we've held the lion share of the market and continue to monitor it closely.

[Laura Engle:]

Okay, great. Well lots of exciting activity going on, thanks for all the information and I will get back in the queue.

[Rajesh C. Shrotriya:]

Thanks for the questions.

[Operator:]

Thank you. Our next question is from Sunil [ph] of Mizuro. Your line is open.

[Rajesh C. Shrotriya:]

Hello. I think Mizuro is having problem connecting.

[Operator:]

Yes sir, our next question is from Adnan Butt of RBC Capital Markets. Your line is open.

[Adnan Butt:]

Thanks everyone. So, first question on ROLONTIS. Would you need data from both Phase 3's to file the BLA or just one?

[Rajesh C. Shrotriya:]

Adnan, you know that the special protocol assessment or agreement that we have with the FDA is for one trial which is a 3.01 trial that is ongoing and enrolling to our satisfaction. So the -- and it could be filed with one trial that's what the SPA is but we have decided to start a second smaller trial just to strengthen our regulatory package.

[Adnan Butt:]

And with the second -- is the program designed to let Spectrum seek approval both from the U.S. and outside the U.S.?

[Rajesh C. Shrotriya:]

In fact that is the primary goal of the second trial. Second trial is primarily being conducted in Europe. We will have some sites in addition to Europe and Canada and U.S. as well but that trial is primarily being run with a goal of having approval at the same time in E.U. or at least improve our chances for approval in Europe, I should say.

[Adnan Butt:]

Okay, and then one on POZIOTINIB, the study you planned to look at exon 20 insertion mutations, how quickly can that study enroll, are these patients that are readily identified or these are patients that you would have to look for?

[Rajesh C. Shrotriya:]

So that's a good question. So you know that we are doing this as a study at MD Anderson Cancer Center which is the largest center with patients with exon 20 insertion mutations. And I can tell you that the last month when I was with the investigator with BI they had nearly all the ten patients lined up to get into the trial. Just because it took more than two to three weeks to get the logistics done, IRB, FDA approval, drug supplies on site we actually lost five patients. But they have five patients ready to go and they have a whole series of patients that are ready to be enrolled. Our belief is that before the end of the year we will not only enroll all the 30 patients but we'll have some data before the end of this year.

[Adnan Butt:]

Okay, and in terms of the ability of other centers to identify these patients as well as something that needs to be developed or is it readily available at this time?

[Rajesh C. Shrotriya:]

So readily available, in fact one thing is that how do you diagnose the exon 20 insertion mutation and MD Anderson has a very good test to do that. FDA came back and recommended that we use another one test too and based on these two tests in fact there are several centers throughout the country where all these patients go to. They concentrate in large major centers and we think that the cohort of investigators can expand so that we can capture patients from other centers other than Texas.

[Adnan Butt:]

Okay, and then the last question on this, I think the primary endpoint is looking at responses, is it an expectation of response, how do patients currently fair under treatment?

[Rajesh C. Shrotriya:]

So, if you look at lung cancer patients cohort there are about 200,000 patients newly diagnosed each year. And about 10% to 15% of these patients have this kind of what they call EGFR mutations. And post the exon 20 mutation is in another 10% to 12% patients. These patients currently do not respond to standard chemotherapy, they do not even respond to the first line of TKIs. So I think this is a very important challenge that the PFS in these patients is less than two months, 1.8, 1.9 months. So these patients are really looking for a treatment, at this time we have nothing satisfactory at this moment. So we are very pleased to see that POZIOTINIB seems to have the potential of benefiting these patients and we are excited so are our investigators.

[Adnan Butt:]

And Dr. Raj would you report response rate data or would you wait until you had some data on durability as well?

[Rajesh C. Shrotriya:]

So, I think that's a good question. We will decide once the patients have been entered in consultation with the investigators. But you got to understand this, it is such an important disease for which there is totally unmet medical need and these are younger, non-smoker, really very anxious patients group for whom there is nothing. So although the study is a 30 patients study I expect that after 10 patients there would be a read out on these patients.

[Adnan Butt:]

Okay, great, thank you.

[Operator:]

Thank you. Our next question is from Ed White of FBR and Company. Your line is open.

[Edward White:]

Hi guys, thanks for taking my question. So just on POZIOTINIB, can you give us an update on the Phase 2 breast cancer, just as far as how enrollment is going and when we can expect to see data there?

[Rajesh C. Shrotriya:]

So, our Phase 2 trial as you know is about a 70 patient trial and that is enrolling patients at this time. However, our partner in Europe -- in Korea has completed enrollment in Phase 2 breast cancer trial. And the enrollment is completed sometime through the end of last year or early this year and we're fully expecting that data to be presented sometime this year. In addition to that our partner is again running trials in other tumor types including gastric cancer, head and neck cancer, and we should have some more data available in the due course of time.

[Edward White:]

Okay I was really referring to your study not Hanmi's study so, the only comment there is just you have about 70 patients and it's enrolling?

[Rajesh C. Shrotriya:]

So our data will not be available in breast cancer this year. However, the data in lung cancer is likely to be available before the year end.

[Edward White:]

Okay, great. And then Qapzola, congratulations on the SPA, I think that's great news. Can you just give us a hint as to the timeline there, how long it's going to take the sites to get up and running, when you could have the first patient in and overall when we should see data from that study?

[Rajesh C. Shrotriya:]

So this is a much smaller study than we had initially. We are doing about 80 and 169 patients study. There's a study with significantly less number involving the study and in fact then about 80, 90 centers in the U.S. and Canada that had been asking us for this trial. So I think once the study starts the enrollment it would take up very quickly but still I expect about 18 months to two years because these studies, it takes about six months to get the IRBs and all the process done that we are right now doing. And we expect about 18 months to two years to enroll all the patients and then whatever the follow up time is.

[Edward White:]

Okay, great. That's all that I have. Thank you.

[Rajesh C. Shrotriya:]

Thanks Ed.

[Operator:]

Thank you. Our questions is from Swayampakula Ramakanth of HC Wainwright. Your line is open.

[Swayampakula Ramakanth:]

Thank you. Good afternoon Dr. Raj. Couple of quick questions but these are going to be more on EVOMELA. It's good to see that the EVOMELA is taking off the way it has. And we understand that there is a little bit of us talking which had happened in the fourth quarter. Are there certain bulk orders as well and on top of that you said that you're having 35% of the market at this point, do you think there is some expansion of the market happening at the same time?

[Rajesh C. Shrotriya:]

RK first of all thank you for your question and I will have Kurt answer the question and then Tom.

[Kurt A. Gustafson:]

Yes, so RK good question, maybe I should have made it clear in our comments. The way we're reporting sales right now is only on sales to end users. So there -- we don't report on sales to the wholesalers so we actually have I think about $2 million in deferred revenue for sales that were to the wholesalers but not to the end user. So we're not reporting any sales that relate to stocking at wholesalers. The stocking that I was talking about was at a few large hospitals who are the end users. And Tom maybe you can talk about the market.

[Thomas J. Riga:]

RK we're ecstatic with the launch of EVOMELA. I think in eight months to have exit shares north of 35% and reporting sales that you saw at 9.4 million. Even if we back out some of the purchases made at the larger institutions which ultimately are still demand units. We’re thrilled with what we're seeing in the market. And for me commercially I think it's a good signal to see the team perform in a highly competitive market that as I think about the promising pipeline ahead it just gives me more confidence and more bullish about the team that we have on the field.

[Swayampakula Ramakanth:]

Okay, that is good. And then I know EVOMELA was brought in from the collaboration with Ligand, so have you ever mentioned anything on the royalty structure and if so what is it and how do you normally pay the Ligand folks?

[Rajesh C. Shrotriya:]

Kurt?

[Kurt A. Gustafson:]

Yeah, we owe Ligand a 20% royalty and it's paid quarterly.

[Swayampakula Ramakanth:]

Okay, thank you. And then in terms of data expectations for this year what should we expect either the next couple of cancer conferences are later in the year, I'm talking about ASCR and ASCO?

[Rajesh C. Shrotriya:]

So RK is your question about what publications do you expect us to do, is that what the question is?

[Swayampakula Ramakanth:]

Yeah, what kind of clinical data or preclinical data that you would put out?

[Rajesh C. Shrotriya:]

We are actually planning several post of presentations and several data into ASCR and ASH and ASCO. And I think we can talk offline as to what we have lined up in those areas but we certainly have several publications in line.

[Swayampakula Ramakanth:]

Very good, thank you very much. Thank you for time.

[Kurt A. Gustafson:]

Thanks RK.

[Operator:]

Thank you. Our next question is from Matthew Andrews of Jefferies. Your line is open sir.

[Matthew Andrews:]

Thank you and good afternoon. Dr. Raj two for you and then one for Joe or Thomas. So as it relates to POZIOTINIB in exon 20 non-small cell lung cancer could you talk about what the regulatory pathway could look like and clinically as well and what would be clinically meaningful response rate in the initial ten patients?

[Rajesh C. Shrotriya:]

So, that's a very good question and this is fighting area where you can look at how other drugs have been treated by the FDA. So in an area where there is really nothing works satisfactorily in a disease like exon 20 mutations there's an objective response rate criteria of 30% response that is considered significant and at the same time clearance of lesions. So there are clinical benefits to the patient. These patients usually have cough and fever and if the cough disappears that is a clinical advantage and if the metastasis in different parts of the bones for example, they have a mets into humorous, ribs, and pelvic region. And if you start seeing clearance of those lesions with the treatment then there's a significant improvement on the objective criteria. So I would say that in the first 10 patients we would be looking for improvement in all these objective criteria at least in 30% of patients.

[Matthew Andrews:]

And then assuming you get that response rate you then enroll the additional 20 patients, is it gating like that or is the plan just to enroll all 30 as quickly as possible?

[Rajesh C. Shrotriya:]

Well I can't comment on that. I mean I can only comment that we are very keenly looking forward to the next 10 patients. However, the protocol does require that we treat 30 patients with the drug. But continue to talk what the process is, so if it is a response rate let's say in 30% or so patients, in the first 30% patients or so there is a pathway that the company could ask for a breakthrough designation from the FDA. If the y believe in it they could be an expedited program for expedited approval of the drug and I have seen some examples where FDA has approved drugs in less than 100 patients, 50 to 90 such patients with rare diseases. However that's all yet to be seen.

[Matthew Andrews:]

Okay, fair enough and then is there any, can you provide any update on the SMP meetings for advance at least related to the safety?

[Rajesh C. Shrotriya:]

In terms of POZIOTINIB?

[Matthew Andrews:]

No, I apologize for ROLONTIS, for the Phase 3 ongoing study, any update for DSMB meetings?

[Rajesh C. Shrotriya:]

I don't think there are any updates at this time. We have not had any clinically meaningful events in this trial. We haven't had any a.e. or anything that is of concern to us. So Dr. Zane do you have any…

[Zane Yang:]

Hi, this is Zane. So I am responsible for clinical development. So coming to this question, Dr. Raj and Joe mentioned the trial is running on track. Although the study is open label but we are planning to trial ourselves. So we cannot say to study arms to balance or not balanced. But overall the higher safety profile is within our known the profile. Both are for Neulasta and ROLONTIS. We did not define any new or unknown safety signals. So we do not believe there is a safety concern at this time.

[Matthew Andrews:]

Oh, great. Thank you for that and then just lastly I know ROLONTIS may not reach market until sometime in early 2019 or thereafter but could you discuss your thoughts on the need to increase sales and marketing and G&A in the U.S. possibly ahead of a launch in 2019 or do you think you have enough sales and marketing staff on hand now that we should really expect a significant ramp in G&A leading up to or as part of the launch? Thanks.

[Rajesh C. Shrotriya:]

Well, that's a good question, I'll have -- before I have Joe respond to it I would say that our strategy of starting with an oncology sales force on oncology products, small products right now are doing about $130 million to $140 million in revenue with a sales force of about 80 to 100 people. The whole idea was to build the infrastructure and keep looking on launching major drugs like ROLANTIS. And in fact I will ask Joe to comment on this further.

[Joseph W. Turgeon:]

Yeah, hey Matt. I think all I can tell you is this, we will let the math lead us to the right decision on how many reps it takes to screw in a light bulb at a time. I can tell you I envision a lean, effective, targeted sales force with us and we've got a great staff here. Mike Grabow is here and his staff will size this thing exactly the way it needs to be. I don't see this being a huge sales force is all I can tell you. But we will do it right. And we don't have to do anything right now either.

[Matthew Andrews:]

Okay, great, thanks for the additional details.

[Operator:]

Thank you. At this time, there is no other questions in queue. I would like to turn it back to Dr. Shrotriya for any closing remarks.

[Rajesh C. Shrotriya:]

Well thank you. I want to thank you all for your interest in Spectrum. We look forward to updating you in the near future on the progress that continues and I'm a strong believer that the best is yet to come.

[Operator:]

Ladies and gentlemen, thank you for your participation in today's conference. This concludes your program, you may now disconnect. Everyone have a great day.