Spectrum Pharmaceuticals, Inc.
Q1 2015 Earnings Call Transcript

Published: 8 May 2015

[Operator:]

Good day, ladies and gentlemen, and welcome to the Spectrum Pharmaceuticals First Quarter 2015 Earnings Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to introduce your host for today's conference call, Shiv Kapoor, Vice President of Strategic Planning and Investor Relations. Sir, you may now begin.

[Shiv Kapoor:]

Thanks. Good afternoon and thank you all for joining us today for Spectrum's First Quarter 2015 Financial Results Conference Call. I'm Shiv Kapoor, Vice President of Strategic Planning and Investor Relations for Spectrum Pharmaceuticals. With me today are Dr. Raj Shrotriya, Chairman and CEO; Joe Turgeon, President and Chief Operating Officer; Kurt Gustafson, Chief Financial Officer; Dr. Lee Allen, Chief Medical Officer; Tom Riga, Chief Commercial Officer; and other senior members of Spectrum's management team. Here's an outline of today's call. First, Dr. Raj Shrotriya will provide you with the highlights of the first quarter and discuss our overall direction and strategy. Kurt will then provide a summary of our first quarter financial performance. Following this, Joe will review the company's operations, and Dr. Allen will review the pipeline. We will then open up the call to questions. Before I pass the call to Dr. Shrotriya, I'd like to remind everyone that during this call, we will be making forward-looking statements regarding future events in Spectrum Pharmaceuticals, including statements about 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, May 7, 2015, 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 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 at www.sppirx.com. I now would like to hand the call over to Dr. Shrotriya.

[Rajesh C. Shrotriya:]

Thank you, Shiv, and thank you, everyone for joining us this afternoon. We are looking forward to 2015 as it should be a pivotal year for several drugs in our pipeline. Today, I would like to focus on our 4 most exciting pipeline assets

[Kurt A. Gustafson:]

Thank you, Raj. Good afternoon to everyone on the call today. Our press release covers all the important figures, so in my remarks, I will touch on a few of the highlights for the quarter. Total product sales were $38.4 million in the first quarter. This excludes $7 million of FUSILEV that we shipped that did not meet our revenue recognition criteria and is reported as deferred revenue on our balance sheet. We expect to record the shipments as actual sales later this year, the $38.4 million reported sales compared to $40.1 million in the same quarter last year, a decrease of 4%. With regards to operating expenses, I want to point out 2 things

[Joseph W. Turgeon:]

Thank you, Shiv. Thank you, Kurt, and Dr. Raj, and most importantly, thank you to everybody on the call for your interest in Spectrum. The future of Spectrum and the promise of our pipeline is exactly where we're focused in the long term, and we are uniquely qualified to execute on it. There aren't many companies of our size that have such a strong diverse pipeline. We continue to be excited about advancing it, and we're moving with urgency to capitalize on it. Spectrum is well positioned for long-term growth. Let me provide you an update on our commercial business starting with FUSILEV. As you all may know, generic leucovorin enter the U.S. market in Q2. We expect our future revenues will be negatively impacted due to the competitive launch. But please remember, this is an at-risk competitor launch that is pending our appeal in the legal system. Our PTCL franchise grew 20% year-over-year. Last year in the first quarter, FOLOTYN sales included a $1.6 million clinical trial supply purchase. That trial is over. It's important to point out that FOLOTYN sales grew by 8% year-over-year, excluding sales for clinical trials. The launch of BELEODAQ continues to grow our PTCL franchise, and our team is laser focused on continuing to penetrate the HDAC market. MARQIBO performance had an uptick in sales, and equally important, an increase in penetration in all TA [ph] LL [ph] treatment centers. You have heard us say in the past, 77% of ALL diagnosis exists in approximately 130 centers across the country. This is of strategic value to us because these are the same centers that we'll be targeting for the potential launch of EVOMELA. When approved, EVOMELA will be our sixth product in the market in the hematology/oncology space. This will in turn further help to fund our potential pipeline blockbusters. We're looking forward to October 23 of this year and being able to provide another treatment option to patients with multiple myeloma. Dr. Parameswaran Hari, who leased the bone marrow transplant unit at the Medical College of Wisconsin, presented data at our recent Analyst Day. EVOMELA was shown to be bioequivalent to standard melphalan. Our product is propylene glycol-free, and the peak in systemic exposure was about 10% higher. Efficacy and safety were consistent with what we already know for high-dose melphalan followed by transplant for multiple myeloma. We look forward to bringing this drug to market with our existing sales force. Also, we plan to file another NDA this year for apaziquone. This is an area of significant unmet medical need and there's been no new product approved in the last 40 years. Let me now share with you the highest priority in the company, SPI-2012, our novel long-acting GCSF. At a recent Analyst Day in March, we had the opportunity to hear directly from Dr. Jeff Vacirca, who is a promising -- prominent medical oncologist. He shared the key Phase II trial data that made our decision to move forward into Phase III. As a reminder, SPI-2012 is not a biosimilar, rather it's a novel biologic and expands patient options. Our team is focused on preparing to start the Phase III trial, and we feel confident we can successfully compete in the $6 billion market. This is an important endeavor for us and we want to make sure that everything goes well. We have set the final protocol to the FDA. We're also actively meeting with investigators to get them on board with our program and to help make the trial available to enroll more quickly. We continue to set up sites to have them ready. We're thrilled to have this asset. Spectrum is uniquely qualified to commercialize this novel biologic. We have the commercial fortitude, broad experience in the white cell growth factor market, and the oncology wherewithal to make this novel biologics a success for patients, practitioners, shareholders and for Spectrum. Lastly, I'd like to briefly comment on poziotinib. This new pipeline asset has the potential to be best-in-class. If you look at the market, current pan-HER inhibitors are $1 billion brands and current development companies are valued in the multi-billion-dollar range. While early, our Phase I data has us very optimistic about the future potential of this asset. Dr. Allen will provide more detail shortly, as our team are working aggressively to develop this product. I'm confident in Spectrum's future through this unique and desirable position. With that, I'd like to pass the call over to Dr. Lee Allen, our Chief Medical Officer.

[Lee F. Allen:]

Thanks, Joe, and good afternoon to everyone on the call today. To realize the potential of Spectrum's exciting cancer pipeline, we are working to be smart, strategic and aggressive in advancing each of our assets quickly to key decision points. We are continuing to progress the development programs for our pipeline assets based on their priority, using their potential value to our stakeholders and clinical benefit to patients as the key parameters. In parallel, we are working to enhance operational efficiencies, being very prudent in the use of our capital resources. Today, I'll provide you with a brief update on our 4 top priorities in the medical development group, SPI-2012, poziotinib, EVOMELA and apaziquone. First, for SPI-2012, our novel long-acting granulocyte colony-stimulating factor. As Joe mentioned, we shared the Phase II data with you at our Analyst Day in March. SPI-2012 is a new biologic that is more potent and increases absolute neutrophil counts to the same or higher levels than pegfilgrastim at approximately 1/2 the dose. SPI-2012 was also shown to have an acceptable safety profile with no significant dose-related or unexpected toxicities and AE incidences that were comparable to pegfilgrastim. As we have discussed, we're excited about this specifically engineered GCSF because of its high potency, its long half-life and targeted delivery to the bone marrow, which is the site of action for this molecule. This novel LAPSCOVERY technology has several important potential advantages over the PEGylated formulation currently approved in the U.S. for pegfilgrastim. With this as our top development priority, we are working aggressively and have now finalized the Phase III study. While this protocol is being reviewed by FDA, we are focused on the logistics of the study and have already identified many of the study sites. It's important to remember that this study, unlike many clinical oncology trials, has a very short-term registrational end point, assessed by blood testing of absolute neutrophil counts over the course of a couple of weeks. Our goal is to rapidly enroll this important study, quickly analyze the data and then expeditiously file the NDA. Next, I'll briefly discuss our newest exciting asset, poziotinib, our novel pan-HER inhibitor. As you know, the human epidermal growth factor receptor pathways have been shown to play critical roles in cancer biology. While we know that this is a very competitive area with multiple approved products and compounds in development, we believe the robust clinical Phase I data, particularly seen in breast cancer patients who had an overall response rate of 60% in a small number of relapsed refractory patients, gives our pan-HER inhibitor the potential to be first-in-class. If this robust antitumor activity is demonstrated in pivotal trials, poziotinib will be well positioned to importantly impact patient outcomes and successfully compete in this multi-billion-dollar market. Our development team has wasted no time and recently met again with our partner, Hanmi, in Korea to discuss development strategies for poziotinib face to face. We have also been meeting with multiple key opinion leaders regarding development options and protocol designs and are quickly working to start a new U.S. Phase II study, possibly by the end of this year. Our focus will be on a fast-to-market development strategy, capitalizing on the robust activity identified in breast cancer patients who failed previous HER2-directed therapies and those with the specific receptor mutations. In parallel, we'll also be initiating studies to support the registration of poziotinib in earlier-stage disease. The robust preliminary data with poziotinib predicts a high probability of success for this important development program. For EVOMELA, our team has continued to focus on supporting the ongoing FDA review of our 505(b)(2) NDA application for this new bioequivalent formulation of melphalan and has responded rapidly to information requests received from the agency. We have had positive interactions with the FDA, and I'm happy to report today that the review is going very well and no concerning issues have been identified. We are now approximately 5.5 months from our PDUFA date of October 23, and our Medical Affairs team is working collaboratively across functions internally and externally with key opinion leaders to support the successful launch of this product when approved. Finally, let me talk about apaziquone, our tumor-activated pro-drug for the treatment of nonmuscle invasive bladder cancer. At our Analyst Day, you heard how excited a leading urologist, Dr. Fred Witjes, was about apaziquone as potential benefit for patients with this disease who have a significant, unmet medical need. The analysis of integrated data from 2 completed clinical trials has demonstrated statistically significant increases in 2 year recurrence rates. We have discussed these data with the FDA and are well on our way with preparing our NDA submission this year. This submission will be made following the initiation of an additional study as was discussed with the FDA. As Joe mentioned, there's is a dearth of new therapies, and apaziquone has the potential to be the first new drug approved to treat nonmuscle-invasive bladder cancer in more than 40 years. As our medical team continues to focus on the key priorities of our development programs, I am confident in our team's ability to execute on our goals and successfully deliver on the value of our promising pipeline. I'll now turn the call back to Dr. Raj.

[Rajesh C. Shrotriya:]

Thank you, Dr. Lee. Let me conclude by reminding all of you that we remain very excited and energized about 2015 in spite of significant decline in our sales for this year. We expect to make major clinical progress on SPI-2012 and poziotinib, which are potential blockbuster drugs. At the same time, we expect to file an NDA for apaziquone and plan to launch our sixth anticancer drug, EVOMELA, with an existing sales force. We plan to make all this progress in a physically prudent manner, so we can exit the year with a strong financial position. With that, let me open the call for questions. Operator?

[Operator:]

[Operator Instructions] First question comes from the line of Adnan Butt from RBC Capital Markets.

[Adnan S. Butt:]

Three for me here. So first on SPI-2012, what remains before you can start? And can you talk to us about the number of patients, the number of sites you've lined up and what potential time lines could be? That's the first question. Then secondly, maybe for Kurt, in terms of the ongoing programs, so the Phase III for 2012 and then Phase II for poziotinib, the year-ending cash position does it take you potentially through Phase III data for 2012? And then just lastly, in terms of taking steps around FUSILEV, what are the time lines either for the generic or for those who are competing where the drug still has Orphan Drug protection?

[Rajesh C. Shrotriya:]

Adnan, let me take your first question and then I'll have Kurt answer your financial question. So at the Analyst Day, we showed you what our current plan was, with which we have gone to the FDA and that required 2 studies of 506 patients randomized against pegfilgrastim. And this will be a -- the efficacy of the drug will be based on really first course of treatment, 10 days of dosing -- 1 dose and then 10 days of evaluation of the blood samples. We have taken this protocol and submitted it to the FDA. And in fact, the FDA is currently discussing, and we will be able to comment later once we received the comments from the FDA as to what the final protocol will look like, but we are very actively and aggressively pursuing our discussions with the FDA.

[Adnan S. Butt:]

Dr. Raj, is that 500 in both or 500 in each study?

[Rajesh C. Shrotriya:]

So the program that we had initially designed included 500 patients in each of the 2 trials. However, our meeting with FDA suggested that, in fact, the number might be less than that. However, that has not yet been finalized. With regard to number of sites, we have -- as of today, we have 50 sites that have been selected and qualified. Our goal is to have actually double of these sites. Between 90 and 100 sites are being, at this time, selected and qualified. With this, let me ask Kurt to comment upon the second part of the question.

[Kurt A. Gustafson:]

Great. So Adnan, I hope you're happy. I think that we're trying to provide a little bit more color for you. I think your question is a good one, and what we're trying to provide is the fact that we have sufficient cash and resources that are making the appropriate priorities -- prioritization decisions within the pipeline to make sure that we fund these programs that we've highlighted today and make sure they're adequately funded. With regards to how far out, we're going to provide that guidance. At this point, I'm only in the position to sort of tell you about where we plan to end the current year, and we certainly have sufficient cash to aggressively fund these 4 programs that we've outlined today and still close the year with greater than $100 million in cash. Beyond that, we're just not at the point here where we can talk about that.

[Operator:]

Our next question comes from the line of Ren Benjamin from HC Wainwright.

[Reni J. Benjamin:]

Maybe just starting off with FUSILEV, can you just give us a little bit of color when did the generic launch at risk? I assume the injunction has been lifted, and so what sort of the next steps to try to see if this can be sorted out in the courts? And would the timing of that kind of look like?

[Rajesh C. Shrotriya:]

So Ren, let me try to answer this question. So you know we have been in litigation for some time. This has been known to us for some time that there is a generic levoleucovorin ANDA has been filed, approved. And we lost the case. Spectrum lost the case in the lower court. We have appealed the decision, and that decision is going to be heard sometime later this year. So in terms of the timing, I can't tell you when the courts will decide, but it is well known that the levoleucovorin generic has been launched in the second quarter. I believe it was on a certain date in April, middle of the April. And the dates that my head of legal team is showing me here that the -- that we are taking all these steps to vigorously defend our Orphan Drug exclusivity, and we believe we have a strong patent and we continue to -- we are waiting for the appeal. Appeal is pending. And I believe the first thing is in August, the court of appeals has indicated that oral arguments will be scheduled for August, and a decision could come any time after that.

[Reni J. Benjamin:]

Okay. And then just -- I guess, just to help me out, either you or maybe Kurt can help me think about this. In some of our work, when we've looked at the revenue streams of the branded product when a generic entry comes into the market, some can be pretty abrupt, but there's always some low level of branded product sales. Now you guys have talked about a significant decrease in revenues, and I guess I'm trying to get a little bit of an idea on what that significant decrease could be. And related to that, you're going to have to make some significant cost-cutting measures on the R&D side and operating expenses side. And so just kind of roughly doing the math, if you're at about $126 million in cash right now, you're going to end the year with about $100 million, my rough math is you're going to be burning through about $26 million. I should be able to make the quick calculations as to how much you'll cut expenses by, but can you give us maybe some color as to how you're seeing this decrease in revenues? Does it go straight to 0? Or is it halfway? How does that work?

[Rajesh C. Shrotriya:]

So let me give some preamble here before Kurt gives you a better answer. So here it is. Listen, the FUSILEV decline in revenue was well known to us. No drug lasts forever. We have -- we had, in fact, if you look at our revenue in 2013, our total product sales were $143 million. This year in 2014, we did $187 million, so how did we manage the $143 million? We kept acquiring drugs. We kept developing all of our programs and we kept recruiting people. So in other words, that we have been preparing ourselves to cost cut and what that means is for you, Ren, that we have been deprioritizing projects that are less sure that would take long time and we have been focusing on the products that have -- add more value and could be quickly in the market. Just to give you an idea, SPI-2012 is a drug that you know as a GCSF. It does not require overall survival or progression free survival that can take 5 to 7 years, before you look at the data. Here, we treat the patient and after 1 dose over the next 10 days, we know how the neutrophil count is. Duration of severe neutropenia is the end point. So these are the studies where we are very pleased to see the relatively, the studies of our major drug will be of short duration and therefore, less expensive. So with this, I'll have Kurt add some more color for Ren.

[Kurt A. Gustafson:]

Yes, I mean, Ren, I think that color though is going to be pretty similar to our statements that we made at the beginning. We are expecting a significant decline in FUSILEV, and it happens immediately following a launch. And the numbers that I've provided to you are fully inclusive of our expectation that we see a significant decline there and that happens in Q2. Whether or not we can do better than that, that's great. But my numbers do not anticipate that. I think that the factors -- we knew this was going to happen. As Raj said, we deprioritized program and we have -- we're going to make sure that we fund these high-priority programs with everything we have. But you're absolutely right, we will -- we've taken a hard look at the operating expense and we are going to make cuts where we need to.

[Reni J. Benjamin:]

Okay. Just switching gears to the clinical trials. In the press release, it mentioned multiple Phase II trials underway for poziotinib, but maybe I'm just reading it wrong. I didn't expect trials to be underway just now, but maybe later this year. Can you just confirm for me that they're currently underway? And if not, I know that you mentioned the trials that are likely -- what indications are likely going to be tackled, but can you talk about when they will actually begin and when we might start seeing data from those trials and if they'll be randomized or more single arm studies?

[Rajesh C. Shrotriya:]

So Ren, you know we acquired the rights to this -- to poziotinib from our partner Hanmi in Korea. And when we acquired, we saw the data of Phase I and we saw that there were at least 6 Phase II trials that are underway. They are in various tumor types including breast, gastric, colorectal, and some of those trials -- and lung. So there are 4 indications in which these trials have been ongoing. And some of the data -- or some of the trials will be completed by the end of this year and the data will become available sometime in early next year. It always takes time to analyze the data and whatnot. So when I'm looking at the schedule, some of these trials will be completed. I think what Dr. Lee pointed out to you that we are planning to start U.S. Phase II trials before the end of this year. And mind you, all the program that is currently running, the 6 Phase II trials, we are not paying for those trials. They are still being paid and will be paid by our partner.

[Reni J. Benjamin:]

Got it. Okay. And just switching gears to another program, apaziquone, what does that -- I know you're finalizing the protocol, can you give us any sort of sense as to how that trial is likely to shape up, maybe how big and how long it could take?

[Rajesh C. Shrotriya:]

So Ren, you have followed apaziquone for a long time, and so I'll just give you the highlights of the trial. You remember the last trial, the end point of the trial was relapsed rate at 2 years. And when you look at the data of 2 years, we missed significance in each of those 2 studies, which were 500-patient trials. But when you combine the 2 studies, the data was highly significant at p-value 0.017. So we took that data, met with the FDA. And our understanding is and our decision is that we can go ahead and file the NDA with this drug, but FDA wanted us to start another trial, take all the learnings from the first 2 trials and incorporate them into the new protocol. For example, if you -- when we look at our analysis of the earlier trials, we did not see significance at 2 years, but data was highly significant at 18 months, 12 months, 6 months, so one of the major change in the protocol for the next -- for the new trial is that we are looking at time to relapse rather than relapse at 2 years. So that goes in our favor, and there are some other minor tweaks to the protocol. For example, instead of giving it once, we are now proposing to give this drug twice. So those are the 2 major things, and there are other minor considerations. However, I have to tell you that about 80 to 90 centers that participated in this trial, in earlier trials in Canada, in U.S., they're all excited and ready to work with this new protocol.

[Reni J. Benjamin:]

And anything further -- one of the things that we learned at the Analyst Day was what happens to the drug when blood is found, right, in the bladder. And so can you just give us some thoughts as to how the protocol may be designed to avoid that in this trial?

[Rajesh C. Shrotriya:]

So, that's another thing we learned, is that this drug is deactivated by an enzyme that's presented in the red blood cells. So therefore, we have now decided in consultation with the FDA that patients with frank bleeding up to TUR will be excluded from the analysis. In fact, if we go back and do the retroactive analysis of the 2 completed trials, there were about 20 patients out of 500 that had frank blood. If we exclude those patients, then the data becomes significant even at 2 years. However, we decided that in the new protocol, we are going to -- our priority, write a statistical plan to exclude those patients from analysis, and FDA has agreed with that.

[Reni J. Benjamin:]

Excellent. And just one final question. Is there going to be any data at ASCO? And what should we be focusing on?

[Rajesh C. Shrotriya:]

So I mean, we are focusing on the FDA registration at this time. We have decided that at Spectrum right now, our decision maker is FDA. We are working towards the FDA and we are paying less attention to promoting these drugs at ASCO and ASH. So at this ASCO, there could be some paper will be presented by the investigators, but Spectrum is not sponsoring any of the representations at this ASH meeting. I mean, the ASH committee.

[Operator:]

[Operator Instructions] We have no further questions in the queue. I would now like to turn the call over to Dr. Shrotriya for the closing comments.

[Rajesh C. Shrotriya:]

Thank you. We would like to thank you once again for joining us on this call today and your continued interest in Spectrum. Our passion is to deliver better treatment options for patients suffering from cancer, and we believe that the team in place and our robust pipeline, we are well positioned for future growth. Thank you.

[Operator:]

Ladies and gentlemen, thank you for attending today's conference. This does conclude today's program. You may now disconnect. Have a great day.