Spectrum Pharmaceuticals, Inc.
Q4 2017 Earnings Call Transcript

Published: 7 Mar 2018

[Operator:]

Good day, ladies and gentlemen, and welcome to the Spectrum Pharmaceuticals Fourth Quarter 2017 Financial Results Conference Call. [Operator Instructions] As a reminder, this call is being recorded. I'd now like to turn the conference over to Shiv Kapoor, Vice President of Strategic Planning and Investor Relations. Sir, you may begin.

[Shiv Kapoor:]

Thanks. Good afternoon, and thank you for joining us today for Spectrum's fourth quarter 2017 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 today and provide an overview. This will be followed by a financial discussion by our CFO, Kurt Gustafson, and the discussion for operation, by our COO, Tom Riga. During this call, we will be making forward-looking statements. These statements are not guarantees of future performance and undue reliance should not be placed upon them. Thus 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 thanks everybody for joining us on the call today and for your wanting to hear about Spectrum today. This is my first call addressing you as the CEO of Spectrum. It's an honor and responsibility that I am humble to have. I thank the Board for the appointment, and I want to give shareholders the confidence that I will drive this organization forward with the focus, discipline and accountability needed to take Spectrum to the next level of growth. In addition, let me offer perspective on how I will execute these quarterly calls moving forward. I expect this calls to be concise, transparent and focused around the key drivers of our progress. 2017 was a breakthrough year for Spectrum driven by significant advancements in our pipeline along a solid operational performance. We continue to aggressively develop poziotinib and ROLONTIS which puts us in a position to start 2018 with strong momentum as we reach the important development milestones with both programs. The milestones for 2018 will provide significant insight in unlocking the potential value of these assets. Key goals for 2018 include, first the aggressive development of poziotinib for exon 20 insertion mutations. This includes rapid enrollment of our multicenter study in non-small cell lung cancer, continued collaboration with MD Anderson and working with the FDA on an optimal regulatory pathway. This year we expect to have new and updated data on response rates, duration of response and PFS in both EGFR and HER2 exon 20 insertion mutations. In addition, we believe there are strong clinical potential of poziotinib across solid tumors where exon 20 insertion mutations exist this is exciting. Secondly we plan to file the BLA for ROLONTIS in Q4 of this year. We have made significant progress in our development with ROLONTIS as we have just recently announced that we met the primary endpoint in our ADVANCE study and we have completed enrollment in our RECOVER study. We have over 600 patients enrolled at our Phase 3 program. We recently announced topline data on 400 patients and the team is now focused on completing the trials and preparing the BLA package for submission by the end of this year. I believe 2018 will provide and prove to be another important year for our exciting late stage assets. Now I’m going to hand over the call to our CFO, Kurt Gustafson to talk about the financials.

[Kurt Gustafson:]

Thanks Joe, and good afternoon to everyone on the call today. I’ll begin with some comments on revenue. Total revenues for the fourth quarter were $28.6 million and of this product sales were $27.9 million. I want to provide some clarity around our six marketed products. The strategy of the company has been to utilize the revenue from our commercial infrastructure to offset our development costs. Our marketed products are small, oncology, hematology drugs that either late in their life cycle or developed under 505(b)(2) pathway that is inherently competitive. Aggressive discounting from the generic is virtually eliminated the margin in poziotinib. And as a result we do not expect to sell much of this product going forward. EVOMELA sales were also negatively impacted by pricing pressures associated with the new generic entrance in the melphalan market. While we believe that we have a better product and will maintain a premium price, the pricing pressures are real and we believe that fourth quarter sales are more reflective and what we’ll see from this product going forward. As we look ahead to 2018, I expect product revenue to be between $90 million and $110 million due to the factors that I have just described. As we look ahead, we expect gross margins to improve driven by a new manufacturing process for EVOMELA. We continue to expect R&D expenses to increase as we accelerate spending on our pipeline drugs poziotinib and ROLONTIS. SG&A expenses were abnormally high in the fourth quarter due to a $7.1 million charge for one-time severance and legal costs associated with the termination of our former CEO. We ended the year with $228 million in cash. Cash burn for the quarter was $20 million which included approximately $13 million burn from operations and $7 million with the burn from financing activities as we repurchased a portion of our debt which was partially offset by some share issuance. With let me turn the call over to Tom.

[Tom Riga:]

First, I want to thank you for following Spectrum. It’s inspiring to be on the team and witness the progress since joining the company nearly five years ago. 2017 was a defining year for Spectrum in which our team delivered on several important milestones. In oncology, clinical data is the driver of our business and in just in the past six months we have seen exciting data on our late stage assets. We have also executed on enrolling patients quickly in important trials. The focus of our operations in 2018 will be surrounded by two main drivers, advancing the development of poziotinib and ROLONTIS. First let me start with poziotinib. In the fourth quarter of 2017, preliminary data from our Phase 2 study at MD Anderson Cancer Center was presented at the World Conference on Lung Cancer in Japan. Promising data was presented with an unconfirmed partial response rate of 73% in the first 11 patients. These data are encouraging for patients who have very few options if any. As a reminder, poziotinib is being developed for patients who have non-small cell lung cancer with exon 20 insertion mutations in EGFR or HER2. These mutations cause steric hindrance in the binding pocket for tyrosine kinase inhibitors which result in limited activity in these mutations from existing TKIs. The prognosis for these patients is poor with a median progression free survival of about two months. Current therapies are unsatisfactory and there were significant unmet need in this population. It is hypothesized that poziotinib due to its relatively small molecular size and flexibility can circumvent steric hindrance related to exon 20 insertion mutations. We have initiated a company-sponsored Phase 2 study in October of last year. This trial will enroll up to 87 non-small cell lung cancer patients with EGFR exon 20 insertion mutations and up to 87 patients with HER2 exon 20 insertion mutations. There are currently 12 sites activated with several more scheduled to open up this month. The enthusiasm for this study is high among our investigators and the plan is to open between 40 and 50 sites this year with some of them being outside of the United States. The unmet need in this patient population is well-recognized and we are having ongoing dialogue with the FDA to find the most expedient regulatory pathway. In addition to lung cancer poziotinib is also being studied as a single agent in our Phase 2 trial in third line setting with breast cancer patients who have failed other HER2 directed therapies we continue to enroll out breast cancer trial and will keep you updated on progress. Additionally we are initiating sites for a new second line study of poziotinib in combination with TDM-1 in women with advance or metastatic HER2 positive breast cancer. We will provide more details on this study when we enroll our first patient. Lastly, there is strong scientific interest around the applicability of poziotinib in the mutation specific tumor agnostic study. We are currently working with MD Anderson and KOL’s from around the globe to design a basket study that quickly addresses the usage of poziotinib in this setting. 2018 will present multiple opportunities for additional data that will provide greater insight into this promising asset. Throughout the year, there will be new and updated information on response rates, duration of response and PFS in both EGFR and HER2 exon 20 insertion mutations. First, a poster will be presented at AACR in Chicago on April 17 by MD Anderson. The focus of this poster will primarily be on preclinical data on HER2 exon 20 mutations. Second, we expect one or more publications on poziotinib in major medical journals in 2018. And finally World Lung in September and ESMO in October could provide a strong platform for additional data. As you can see it's going to be a busy an exciting year in the development of poziotinib and we will keep you posted on progress. Moving on to ROLONTIS our novel GCSF, just over a month ago we announced the ADVANCE study met its primary efficacy endpoint of noninferiority in duration of severe neutropenia between ROLONTIS and pegfilgrastim in over 400 patients. The adverse event profile was similar between the two treatment arms. We also announced that the RECOVER study has completed enrollment. The ADVANC and RECOVER studies were similar design. These two Phase 3 studies are multicenter randomized and active controlled studies with greater than 600 patients in total. The enrolled patients receive chemotherapy every 21 days and ROLONTIS has administered subcutaneously as a fixed dose once per cycle. The primary study endpoint is the duration of severe neutropenia assessed through the absolute neutrophil counts in the cycle one of chemotherapy based on central laboratory assessment over the 21-day cycle. Secondary endpoints include incidence of neutropenia complications, incidents of febrile neutropenia and safety. We expect to present the results from the Advance study at a major medical meeting this year. Finally, we are working towards our pre-BLA meeting with the FDA to make sure that everything is aligned in preparation for Q4 BLA submission. If approved we will have the opportunity to compete in the multibillion dollar market with a novel asset. It’s an honor to lead our team from development through commercialization of these promising late stage assets that can fundamentally change our company and more importantly contribute to the betterment of cancer patients. We have multiple milestones this year and the operations team is laser focused on maximizing the opportunity ahead. I will now turn the call back over Joe for closing remarks.

[Joe Turgeon:]

Thank you Tom, thank you also Kurt and Shiv. And I’d like to now open it up to questions at this time.

[Operator:]

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

[Adnan Butt:]

Joe and team congrats on the progress. I wanted to dig a bit deeper into the data presentation question. Are you saying that you don't expect any clinical data until World Lung or ESMO? Or is the press release saying that there could be some clinical data at AACR?

[Joe Turgeon:]

At AACR we do know that there will be preclinical data presented on HER2 exon 20 insertion mutations from the MD Anderson, most of it being preclinical. There may be a mention of the one compassionate use patient and actually in human, but for the most part it's a preclinical presentation at AACR.

[Adnan Butt:]

And then Joe the follow-up, I mean how confident are you that data will be presented at World Lung or ESMO and not before then?

[Joe Turgeon:]

It’s a great question, let’s tell you the facts. I know that from our trial we won't have any data from the Spectrum trial, okay, got to present this year at least it will be that we just started to enroll. Now, on the MD Anderson trial because they own the data, I can't tell you if and when there will be anything in between. Now you got to think of medical meetings, think of potential publications that could come up and that will come out of MD Anderson. For sure I'm very confident you ask for my confidence level, Adnan I am very confident that World Lung actually will see data that for sure I think is a pretty sure bet.

[Adnan Butt:]

I’ll just ask a second question then get back in line. In terms of the discussions with the FDA for poziotinib to look for an expedited plan, is there a specific set of data that the FDA is looking for and when will you have that data so you can update us on that expedited plan?

[Tom Riga:]

We have had a preliminary meeting with the agency. We feel that we understand what their expectations are, but it’s not - we typically aren’t going to talk about those interactions with the agency but we did have the initial meeting.

[Adnan Butt:]

So does your Phase 2 include that expedited feedback or not at this time?

[Tom Riga:]

Our Phase 2 study is up to 87 patients and its designed that way but there hasn’t been any modifications to the Phase 2 design with that feedback.

[Joe Turgeon:]

Adnan I’ll just add this, we've done extension research and our homework on what a case for breakthrough therapy et cetera. We certainly feel that potentially we'll meet those criteria and we’re going to work hard to go through the process to do just that, we will.

[Operator:]

Our next question comes from David Buck of B. Riley. Your line is open.

[David Buck:]

First one for Joe. Can you talk a little bit about what changes you're looking to make at Spectrum as - in your CEO role? And besides your comment about conference calls, what should we be expecting in terms of any changes in strategy potentially? Quick one for Kurt. Just in terms of R&D, can you give some range of what you would expect the 2018 R&D budget to be? And then just for ROLONTIS, can you maybe talk - maybe for Tom, just talk about where do you expect that venue to be for some data for the first U.S. study for that?

[Joe Turgeon:]

David I’ll take the first part, we’ll go round the horn here thanks for the question. One thing for sure I think obviously I’ll have different style I’ll start with that, I think you always have a different style with different people. I’m very data driven and I expect the company to make decisions based on science and data and that's the way we will do it. As far as our strategy goes with our two big projects, I was working on them in my old role as operations. I think we have great strategies there. We are executing very well. I feel really good on enrollment, I feel good about our work towards filing the BLA with ROLONTIS, we're already doing everything we can to get that going in the right direction with poziotinib as you know. Our trial is enrolling. We’re going to be increasing our sites for poziotinib and the exon 20 insertion mutation. We just talked about. We hope to take all the right steps to get us to a therapeutic breakthrough designation we hope. So all of that is good and I’m guy who expects accountability, I expect people to do their jobs and I hold people very accountable. One change I will mention you may have seen the press release we just added a person to the Board. This person had great expertise that I think will need. It's an example of I think making the Board better by having somebody who understands - both the reimbursement and has worked with the Federal government extensively. I think these are important factors as we go compete in these bigger markets, so that certainly something that’s different. I have a very focused mentality and I will say we've made some changes in structure on several departments already and some people. So, in a nutshell that's the first asset what we're doing and I’m excited about where we’re going. I’ll let Kurt now answer the second question.

[Kurt Gustafson:]

So David what we’ve tried to do you is give you some sales guidance and then on the other areas, no our guidance here is more directional in nature and its going to be a function of how aggressively we can enroll patients. So I think we’ll limit our guidance in the other items to what I’ll call directional guidance.

[Tom Riga:]

David it's Tom, your question was on ADVANCE. We did submit to ASCO in February, we’re waiting to hear back. So once that decision is made we’ll know.

[David Buck:]

And maybe if I could sneak in one more question. Just poziotinib ex-U.S., can you talk about whether you had any discussions with regulators there in terms of pathway forward?

[Joe Turgeon:]

Right now we’re focused our regulatory discussions primarily with the FDA in the U.S. but we are looking to enroll ex- U.S. sites and we do have worldwide rights with the exception of China and South Korea. So those conversations will begin shortly.

[Tom Riga:]

I’ll add David we did at World Lung last year we began discussion for KOLs in Japan as you may know that in Japan that the actual rate of recurrence is much higher for some reason in Japan. So that's an important market for exon 20 insertion mutations and we’ve begun discussions with the KOLs in Japan and we’re pretty excited about it. So that’s good news.

[Operator:]

Our next question comes from Matthew Andrew of Jefferies. Your line is open.

[Matthew Andrew:]

A couple from me. Tom and Joe just curious I appreciate the Dr. Heymach and control the data. Any particular reason why he would not want to present possibly at the ASCO meeting versus waiting for World Lung Conference?

[Tom Riga:]

I want to be careful not to speak for Dr. Heymach here but I’m thinking this comes down to the maturity of the data and wanting a comprehensive data set to present in totality. One of the questions that initially came out of Japan are leading them to want to have a total set and I think that’s likely the thinking. But again I’m just cautious speaking for him.

[Joe Turgeon:]

Yes, I agree I think Tom spot on.

[Matthew Andrew:]

And then just on ROLONTIS in their RECOVER study, what’s the relative sizing of this to ADVANCE memory serves it’s a bit smaller. So based on the primary endpoint, how well powered are you to be able to meet it for non-inferiority. You think there's healthy margin there that you should be able to replicate the data from ADVANCE announced in February?

[Joe Turgeon:]

Yes, the short answer to your question is yes, but the ADVANCE study is just over 400 patients RECOVER, just over 200 and the RECOVER study is 87% powered. So we're feeling that we have ample power to answer the question.

[Operator:]

Our next question comes from Ed White of H.C. Wainwright. Your line is open.

[Ed White:]

Just a couple here, the first one is on the poziotinib breast cancer study that you guys are running. I know the first cohort of 32 patients were treated with 24 milligrams once daily two weeks and one week off. And then the second cohort that you mentioned hasn't started yet - has enrolled the first patient that's a 16 milligram continuous dosing. I'm just wondering on the first cohort are you going to release the data from that and when will we see that data if you are?

[Joe Turgeon:]

Actually its 33 Ed, how are you doing by the way. It was 33 in the first cohort and you’re right it was at a 24 milligram dose and that was a two weeks on, one week off from the schedule. And we did switch to a 16 continuous. So you’re spot on. Yes, we probably confused you a little bit. When we said that nobody has been enrolled yet, that's on a new trial we’re doing in second line with the TDM-1 in a much sooner in the algorithm and second line. So that's what Tom meant by no enrollment yet. We are currently enrolling in the Phase 2 third line at the new dose of continuous 16. There will be data's coming out sooner on the first cohort in Korea and I can’t give you the exact date, but soon there will be the data released on the first 33 patients but keep in mind the doses schedule are going to be quite different on the second and that HER2 specific in third line breast cancer.

[Ed White:]

And then just, is there any details as you can give us on the planned basket study for pozi and the other solid tumor indications you’re looking at?

[Joe Turgeon:]

I’ll start and I’ll let Tom because he is working on that. First I got to tell you when I speak to the people at MD Anderson who are working on this and have the background, they get out of their chair because they are excited about the non-small cell lung cancer but literally they stand up and they get so excited because what they have and they’ll be publishing this at sometime Ed. They have a lot of data that shows across many solid tumors that exon 20 insertion mutation are expressed in both EGFR and HER2. Now it’s different levels on all these different tumor types but it’s amazing how many of the solid tumors do show there and again they’re going to have some data come out on that. So we are now working with MD Anderson and other KOLs designing that basket trial, because this is really exciting because, we may get excited about the non-small cell lung cancer opportunity here but this could open the floodgates to many, many more potential patients. So Tom I don’t know if you want to add anything.

[Tom Riga:]

We are excited about the early conversations with both KOL and MD Anderson. I think there is a regulatory blueprint here as analogs with other agents, KEYTRUDA and track mutations at all. But I think this one presents a significant opportunity in addition to MD Anderson's data on prevalence. We’re also fielding some work internally to really understand the prevalence by tumor type across the Board to get a deeper insight into absolute market size.

[Ed White:]

And just two relatively quick things, on the RECOVER data when are we going to see that data coming out. Is that going to be before the BLA is published or slightly before, can it be after when can we expect that?

[Tom Riga:]

Yes. I think the way to think about that one is the second half of the year. We're working towards filings the BLA before the end of the year and RECOVER would likely be ahead of that. So I think second half of the year is a safe bet.

[Ed White:]

And then we had spoken before about your hiring of Chief Medical Officer, I was just wondering how that search is going?

[Joe Turgeon:]

Yes, it’s top priority. I’ll let you Tom tell you about the search but we’re actively looking and Tom you want to give any update.

[Tom Riga:]

It's a conversation we actually just had a discussion about a few minutes before the call, but we are actively searching and hope to find the right leader soon.

[Ed White:]

And just one quick one for Kurt, when you had said on a directional basis R&D will be up for the year is that on a GAAP or non-GAAP basis?

[Kurt Gustafson:]

On a GAAP basis. I mean on a GAAP and non-GAAP basis.

[Operator:]

And I’m showing no further questions at this time. Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program and you may all disconnect. Everyone have a great day.