Spectrum Pharmaceuticals, Inc.
Q2 2017 Earnings Call Transcript

Published: 4 Aug 2017

[Operator:]

Good day, ladies and gentlemen, and welcome to the Spectrum Pharmaceuticals Second Quarter 2017 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 call will be recorded. I would now like to introduce your host for today's conference, Mr. Shiv Kapoor, Vice President of Strategic Planning and Investor Relations. You may begin.

[Shiv Kapoor:]

Thanks. Good afternoon, and thank you for joining us today for Spectrum's Second Quarter 2017 Financials Result Conference Call. I hope you've all had a chance to review the press release we issued earlier today. If not, it's available on our website at www.sppirx.com. I would 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, time line 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 date of this conference call, August 3, 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 second quarter and overall strategy. I'd now like to hand the call over to Dr. Shrotriya.

[Rajesh Shrotriya:]

Thank you, Shiv, and thank you, everyone, for joining us this afternoon. I'm very pleased to report that during the second quarter, we have made significant progress in all areas of our business. Our clinical programs with three of our highest priority drugs, ROLONTIS, poziotinib and QAPZOLA, have all made marked progress. In addition, we drove solid performance across our commercial business while maintaining strong fiscal discipline. I'm excited to see the momentum continue during the second half of 2017. I would like to begin by giving you a high level sense of our priorities. First, ROLONTIS, our novel GCSF, has completed enrollment ahead of schedule in the Phase III registrational trial conducted under a SPA from the FDA. Over 400 patients have been randomized. We plan to announce top line data in Q1 2018. And we remain on track to file a BLA next year. To strengthen the registration package in both Europe and the U.S., enrollment is well underway in a second trial, the RECOVER international study, which is similar to the ADVANCE study, but will enroll approximately 218 patients. This trial is currently enrolling patients in the U.S. and Europe. We are expediting enrollment by utilizing many of the U.S. sites that participated in the ADVANCE study. Now let me talk briefly about poziotinib, which I believe is one of the most promising drug being developed for patients with lung cancer. As a physician, with more than 35 years experience in drug development, I have never been as excited as with poziotinib. Poziotinib is being developed for patients who have non-small cell lung cancer with a genetic mutation involving exon 20. These patients are generally younger, and have a progression-free survival of less than two months. Currently available all therapies are unsatisfactory. We are beginning to see positive results with poziotinib in patients who are on compassionate use. An excitement is building. Just this morning, Journal of Thoracic Oncology has published positive clinical findings with poziotinib. The World Lung Conference to be held in Yokohama, Japan in October this year has already accepted a paper for oral presentation on poziotinib. Poziotinib is an oral, irreversible, tyrosine kinase inhibitor, or TKI that is some preclinical FAs is nearly 100 times more potent than third-generation TKIs. Although, poziotinib has activity in a number of tumor types, it is currently being studied in non-small cell lung cancer with a genetic mutation exon 20 insertion in EGFR or HER2. Additionally, based on responses seen in Phase I trials, we are also studying it in breast cancer patients. Lung cancer patients with this type of genetic mutation generally have poor responses to standard therapy, targeted therapies and even to some third-generation tyrosine kinase inhibitors. In preclinical studies, it was shown that poziotinib selectively and potently inhibits exon 20 mutants. It is in genetically engineered mouse model, poziotinib reduced tumor burden by 85%. In EGFR exon 20 and 60% in HER2 exon 20, as determined by magnetic resonance imaging. This data was presented at the World Lung Conference in Vienna in December of last year where it created a lot of excitement. Based on this exciting data, the FDA approved a compassionate use protocol for the first patient PET CT scans following four weeks of poziotinib given orally 16-milligrams daily showed a significant radiological response. Nine months later, this patient remains on therapy and is doing well. Since then we have had another compassionate use patient showing a positive response to this drug. We and the scientific community, including physicians at the MD Anderson Cancer Center are very enthusiastic about this and a Phase II study is currently enrolling patients at MD Anderson Cancer Center under the leadership of Dr. John Heymach. 15 patients have already consented, of which nine patients have currently being dosed with poziotinib. Interim data will be presented at an oral presentation at the World Lung Conference in Japan in October. Following a scientific advisory board meeting and discussion with the FDA, we have decided to broaden this clinical program and now initiating a multicenter trial in this patient population at several top cancer centers in United States. Finally, I would like to provide you an update on our novel tumor-activated drug called QAPZOLA in bladder cancer. QAPZOLA's registrational study is now open for enrollment. This study has been designed, taking into account learnings from previous studies and input from the FDA, and is being conducted under a special protocol assessment agreement. I believe Spectrum is poised for transformational growth and we have several key milestones approaching in the near term. We are executing our strategy with focus and discipline, while investing in our advanced stage pipeline. We expect interim data from poziotinib in lung cancer this year, data from ROLONTIS in first quarter of 2018. I believe Spectrum is in an excellent position for future growth. 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 Chief Financial Officer, Mr. Kurt Gustafson, to talk about our financials. Kurt?

[Kurt Gustafson:]

Thank you, Dr. Raj, and good afternoon, everyone, on the call today. I'm going to cover a few important financial highlights from the quarter and let's start with revenue. Total revenues for the second quarter were $34.3 million and of this, product sales were $31.2 million. This was a solid quarter led by the performance of FOLOTYN with sales of $11.2 million and EVOMELA with sales of $10.1 million. EVOMELA is performing well and we continue to increase our market share in the melphalan market despite increased competition. In just over a year, since launching EVOMELA, we have roughly 50% market share. We believe the market is recognizing the benefits that EVOMELA brings to caregivers and patients. I want to make one comment about our operating expenses going forward. For the last 18 months, we've been reporting a portion of our sales and marketing expenses as cost of service revenue for the promotion work that we've done for Eagle Pharmaceuticals. As of June 30, our collaboration with Eagle ended. As a result, approximately $2 million that we've been reporting as cost of service revenue will be reported in our SG&A line in future quarters. There is no change to the overall operating expenses, just a change to the line item where these cost will appear on our financial statements. Based on strong revenues and effective management of our working capital, we ended the quarter with $139 million in cash and equivalents compared to $137 million in the previous quarter. In addition to the $139 million in cash on our June 30 balance sheet, after the end of the quarter, we utilized our ATM facility to raise approximately $24 million. These funds are not reflected in our Q2 cash balance. This now completes the aggregate amount available under that ATM facility. Since the issuance was completed after the end of the quarter, it will be reflected in next quarter's filings. One final item to note. We are pleased to announce that FOLOTYN was recently approved in Japan where our collaborator Mundipharma will be marketing the drug. The approval in launch triggers milestone payments totaling approximately $5 million from Mundipharma and we will also be entitled to royalty payments based on future sales in Japan. With that, let me hand the call over to Joe.

[Joseph Turgeon:]

Thank you, Shiv, Dr. Raj and Kurt. I thank you to everybody on the call. We've an exciting advanced stage pipeline that is driving a transformation of our company. It has the potential to transform us from a company that makes in excess of $100 million in revenues from niche cancer indications, to a company that competes in multiple blockbuster markets where there is significant unmet needs. What we've shown is we can do extremely well commercially, and have a great deal of confidence that we can continue this performance in future. Let me talk about the pipeline assets that can help change the face of our company. Let me start with the company's highest priority ROLONTIS, a long-acting granulocyte colony-stimulating factor, or GCSF. ROLONTIS is a novel molecule that has been designed using a proprietary platform technology. Let me remind you we have worldwide rights to ROLONTIS with the exception of Japan, South Korea and China. In Phase II studies, ROLONTIS has shown impressive safety and efficacy. This is an important program for us and we want to make sure to build a strong regulatory package. As a result, we have designed a comprehensive clinical program with two Phase III trials to evaluate ROLONTIS. These registrational trials are multicenter, randomized and active controlled sites. Enrolled patients receive chemotherapy every 21 days. ROLONTIS is administered subcutaneously as a fixed dose. The primary endpoint is duration of severe neutropenia assessed to the absolute neutrophil count in cycle one of chemotherapy based on central lab assessment over the 21-day cycle. Secondary endpoints include incidents of neutropenia complications, incidents of febrile neutropenia, relative dose intensity and safety. As Dr. Raj mentioned, the ADVANCE study enrollment was completed ahead of schedule. The team did a great job opening key clinical sites for patient enrollment and we were impressed by the physicians enthusiasm for this program. We have randomized over 400 patients in this trial and expect to have top line results in the first quarter of 2018. Now that we've completed enrollment of the ADVANCE trial, we are using our experiencing to select sites that will expedite the enrollment of the RECOVER trial. The RECOVER trial is similar to the ADVANCE trial and trial design. This international trial will enroll around 218 patients mostly from Europe and the U.S. and also some patients from other countries. I can tell you that enrollment is already off to a great start and we anticipate to complete enrollment by Q1 next year. We continue to expect to file a BLA for ROLONTIS in 2018. With ROLONTIS, we'll have the opportunity to compete in the multibillion dollar market with a novel agent, and if successful, this drug could change the growth trajectory of our company. Now let me talk about a drug that could change the course of therapy for lung cancer patients

[Rajesh Shrotriya:]

Thank you, Joe. The month of August marks the 15 anniversary of Spectrum. And I would like to take this opportunity to thank many of our investors who have stayed with us for all these years. I'm very proud to report that in addition to developing drugs with blockbuster potential, we have treated over tens of thousands of cancer patients with our drugs. Looking ahead, with the progress we're making, I believe we are in a unique position to transform our Company, to help patients and benefit our shareholders. Each of our three late-stage drugs will have significant events in the coming months. We look forward to sharing this with you. Important milestones coming in months are

[Operator:]

[Operator Instructions] And our first question comes from Ed White with H.C. Wainwright. And your line is open.

[Edward White:]

Hi guys. Thanks for taking my question. So the first question I have is just on ROLONTIS. The topline data in the first quarter of 2018, do you think you will have enough – the full data set by ASCO in 2018? And then on the RECOVER study, the enrollment will be complete in the first quarter of 2018, when you expect to release top line data from that study?

[Rajesh Shrotriya:]

So, Ed, good question. So you're absolutely right. ASCO is one of the most important meetings in oncology. And we are pushing our team to submit an abstract for ASCO in February of next year. You're absolutely right, we are shooting for presenting the data at ASCO 2018 and also filing an abstract in February next year. We're working very hard to do that. I've got an extra team of statisticians and programmers to do that and I hope we can achieve that. That's our goal. Similarly, RECOVER study is being done by many of the investigators who have already participated in our ADVANCE trial, and I am hoping that the study will also be completed as quickly as it can be and we will have all the data available because we plan to file the NDA before the end of next year.

[Edward White:]

Okay, great. Thanks Dr. Raj. And then just on poziotinib, so on the last call, you had mentioned if you saw positive responses in the MD Anderson trial in three of the first 10 patients you can apply for the breakthrough designation. I just want to get an update there, it seems like you have positive data on two patients so far. I'm just curious as to when we might see the data from the 10, so you can apply for breakthrough designation.

[Rajesh Shrotriya:]

So, Ed, let me remind you that this trial is an investigator-sponsored trial being conducted by John Heymach, who is actually also Chairman of our advisory – Scientific Advisory Board on this drug. Before this call, I did have a call this morning and he told me that the enrollment is progressing extremely well, better than he expected. In fact, he has got several people online consenting and trying to get into this study. Several patients at this time are on poziotinib. Our plan is that once we have data – interim data from this study, we plan to approach FDA and ask for a breakthrough designation. But we are not waiting for just that one trial. In fact, under the advice of our Scientific Advisory Board and the FDA, we have now an approved protocol for a Spectrum-sponsored trial in the same patient population that we plan to start imminently. In fact, right now we have already investigators who are lined up to start this trial and you will be hearing more about this in the near future.

[Edward White:]

Okay, great Dr. Raj, because that's right – where I was going with my next question. Are you going to be looking at both the EGFR patients and the HER2 patients, HER2 positive Exon 20 Mutation – because I know the MD Anderson increased enrollment to 60 patients and added in that second cohort of patients with the HER2 Exon 20 Mutation?

[Rajesh Shrotriya:]

That's another good question. So if you remember in the preclinical gem model of mice what was genetically-engineered mouse model, the activity was seen in both EGFR and HER2 and the first patient actually – first compassionate use patient was actually HER2 patient. So although the protocol that was initially drafted by MD Anderson Cancer Center and approved by the FDA required only 30 patients and all were EGFR. However, there were so many patients with HER2 and seeing the exciting response in patient 1, we all decided to add HER2 cohort as well. So now the study is listed as 60-patient study, at least 30 patients from EGFR cohort and 30 patients from the HER2 cohort. So that'll be 60-patient study. Right now patients are being enrolled in both of these cohorts at MD Anderson Cancer Center and Spectrum's protocol actually allows both patients to be enrolled.

[Edward White:]

Okay, thanks Dr. Raj. I’ll get back in a queue. End of Q&A

[Operator:]

And I'm showing no further questions at this time, I'd like to turn the call back to Dr. Raj Shrotriya for any closing remarks.

[Rajesh Shrotriya:]

Well, thank you. I would like to thank you all of my listeners today for your interest in Spectrum. We look forward to updating you in the near future on our continuing progress and I expect lot of it is coming. Stay tune. Thank you very much.

[Operator:]

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