SPPI
#Thanks.
Good afternoon, and thank you for joining us today for Spectrum's Second Quarter 2015 Financial Results Conference Call.
I'm <UNK> <UNK>, Vice President of Strategic Planning and Investor Relations for Spectrum Pharmaceuticals.
With me today are Dr.
Raj <UNK>, Chairman and CEO; <UNK> <UNK>, President and Chief Operating officer; <UNK> <UNK>, Chief Financial Officer; Dr.
<UNK> <UNK>, Chief Medical Officer; <UNK> <UNK>, Chief Commercial Officer; and other senior members of Spectrum's management team.
Here is an outline of today's call.
First, Dr.
<UNK> will provide you with the highlights of the second quarter and discuss our overall direction and strategy.
<UNK> will then provide a summary of our second quarter financial performance.
Following this, <UNK> will review the Company's operations, and Dr.
<UNK> will review the pipeline.
We will then open up the call to questions.
Before I pass the call to Dr.
<UNK>, 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, timeline, 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, August 6, 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 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 at www.SPPIRX.com.
I would now like to hand the call over to Dr.
<UNK>.
Thank you, <UNK>, and thank you everyone for joining us this afternoon.
I'm very pleased with our performance this quarter.
We have maintained strong fiscal discipline while advancing our pipeline.
We have four exciting events coming to fruition within next several months.
With two potential blockbuster drugs under development making progress, one in Phase 3, a registrational trial, and other entering Phase 2 study in the United States, one drug pending an FDA approval decision, and with yet another drug the filing of an NDA, we believe that the second half of this year promises to be full of exciting events.
In my further brief remarks, I'll focus on these four top priorities.
First, SPI-2012, a novel, long-acting GCSF or granulocyte colony stimulating factor ---+ this drug has shown a strong efficacy in Phase 2 clinical studies conducted in about 148 patients.
It targets a blockbuster market of nearly $6 billion.
It has the potential to change the face of our company, and remains our highest priority.
We are taking several steps that will ensure the success of this drug.
To ensure alignment with the FDA, we are pursuing a special protocol assessment, or SPA.
We plan to initiate a Phase 3 non-inferiority study.
After reviewing our Phase 2 data, and after discussions with several key opinion leaders, we have proposed powering the study at 80% to show superiority compared to pegfilgrastim.
Second, I am very excited about Evomela's potential approval later this year.
The discussions with the FDA are proceeding well, and if approved, Evomela will become our sixth commercial drug that will be launched with our existing sales force.
Let me now talk about our second potential blockbuster drug, poziotinib.
Based on our assessment of the market opportunity and the strong clinical data that we have seen in breast cancer, we are developing a Phase 2 program in consultation with US key opinion leaders.
In addition, our partner Hanmi is conducting several Phase 2 trials in various tumor types.
Based on early clinical data, we believe that poziotinib has best-in-class potential among pan-HER inhibitors.
Lastly, we are on track to file an NDA by the end of this year on apaziquone, a novel drug for non-muscle-invasive bladder cancer.
In addition, a conformity trial with apaziquone is being pursued with the FDA through another special protocol assessment.
We are continuing to work hard to control expenses, as evident this quarter.
I'm pleased with our continued commitment to fiscal discipline.
We are expecting to end this year with a stronger cash position than our prior expectations.
<UNK> will talk more about our operations.
<UNK> will then provide you more details about our financials, and Dr.
<UNK> will go in some depth with our clinical update.
Now, let me hand over the call to our Chief Financial Officer, Mr.
<UNK> <UNK>.
<UNK>.
Thank you Raj, and good afternoon to everyone on the call today.
I just want to highlight a few items in our financial results.
First, we continue to fund our highest-priority projects, but I think you can see from our second quarter results that we have made progress with reducing our operating expenses both year-over-year and versus the previous quarter, to address the declining Fusilev sales.
Our goal is to further identify operating efficiencies which will lead to additional reductions in SG&A expenses.
We will also continue to drive our R&D infrastructure costs lower, however, our overall R&D expenses are expected to increase with the ramp in clinical trial activity.
Also, let me make one comment on sales.
The second quarter product sales of $35.1 million exclude the $7 million in Fusilev sales that were deferred in Q1.
We still expect to recognize that $7 million in the third quarter.
Also in the second quarter, we recognized $9.7 million in licensing revenue associated with the CASI Pharmaceuticals transaction we signed last year, where we out-licensed the Chinese rights to three of our products.
You'll recall that we received a 19.9% stake in CASI, along with a $1.5 million promissory note.
The revenue recognition for this deal had been deferred until we signed supply agreements.
The supply agreements were signed in the second quarter, which allowed us to recognize the revenue.
I also want to make a few comments about cash.
The recent generic competition has created additional volatility in working capital quarter-over-quarter.
While net cash flow was particularly strong in the second quarter, we expect this to reverse in the second half of the year.
A better way to think about our cash burn is on a full-year basis.
We started the year with $133 million, and based on our recent operating results, we now expect our year-ending cash balance to be greater than $110 million, up from our previous guidance of $100 million.
This guidance does not include any cash flows from any new business development deals.
Before I hand the call over to <UNK>, I want to emphasize that we remain very active on the business development front.
While we continue to look at in-licensing opportunities, we are more focused in the near term on out-licensing, particularly in geographies outside of the United States.
With that, let me hand the call over to <UNK> to provide an operational update.
Thank you <UNK>, thank you Dr.
Raj, thank you <UNK>, and most of all, thank you for everybody on the phone for your interest in Spectrum.
We continue to focus on developing Spectrum's promising pipeline.
We're in a unique position to be able to advance these exciting programs while maintaining a strong commercial organization in the hematology and oncology marketplace.
First, I'd like to provide you with an update on our commercial business.
Our PTCL franchise demonstrated double-digit growth year-on-year of 11%, and quarter-over-quarter, growth of 16%.
Our team remains focused and disciplined on execution and increasing the breadth of our customer base.
Zevalin second quarter revenues were $4.8 million compared to $4.2 million in Q1, a 14% quarter-over-quarter growth.
In Q2, Marqibo sales had double-digit growth both year-over-year and quarter-over-quarter.
While the relative sales are small in this limited indication, our performance is of strategic value because these are the same centers that we'll be targeting for the potential launch of Evomela.
In regard to Fusilev, a generic entrant launched in the second quarter.
This had a negative impact on reported sales and average selling price.
As we said in the past, we expect our future revenues will be significantly impacted due to the competitive at-risk launch.
Uncertainty and price erosion are the direct result of the competitive entrant, and will continue to put downward pressures on this market.
We await our appeal in the legal system with this at-risk competitive launch.
As you know, our base business is just a stepping stone for us.
The cash flows from our base business help us develop our pipeline, and our pipeline has never been stronger.
First, let's talk about Evomela.
If approved in October, Evomela will be our sixth product in the market in the hematology/oncology space.
Evomela has a stability advantage of four to six hours versus the current version that is only stable for one hour.
This represents an important point of differentiation, as the current administration process is cumbersome and disruptive for caregivers when treating patients.
Our product is propylene glycol-free, and the peak in systemic exposure is about 10% higher.
The efficacy and safety were consistent with what we already know for high-dose Melphalan, followed by transplant for multiple myeloma.
The Melphalan market is around $100 million, and is concentrated in just 100 transplant centers across the US.
The top 20 centers represent over 50% of the business.
This market is very concentrated, and has excellent synergy with our existing infrastructure.
We look forward to October 23, and bringing this drug to market with our existing sales force.
Also, we plan to file another NDA by the end of the year for apaziquone, a potent tumor-activated pro drug for bladder cancer.
This will be our third NDA in three years.
In consultation with the FDA, we are pursuing a special protocol assessment for a confirmatory clinical trial.
Bladder cancer is an area of significant unmet medical need, with no new products approved in the last 40 years.
The second quarter was a busy one for our highest priority in the company, SPI-2012, our novel long-acting GCSF.
Our Phase 3 program is getting ready to begin, and I'm excited about the proposed trial design that we are finalizing with the FDA.
A Phase 3 program in breast cancer that is over 90% powered to detect non-inferiority and 80% powered to detect superiority, will address some very important clinical questions.
We are also keeping a close eye on ongoing marketplace events with regard to biologics.
You may have been following the first approved biosimilar in the US through the 351(k) pathway as it navigates both the FDA and the judicial system.
We are closely watching the approval, potential launch, and evolving legislation on how these products will be reimbursed.
We have modeled multiple scenarios based on the latest legislation.
Because ours is a novel agent, we believe we'll be in a favorable position of having untethered reimbursement.
Bottom line, we know this marketplace inside-out.
We are both confident, and looking forward to successfully competing, in this $6 billion market.
Finally, we're excited to be advancing poziotinib in the US Phase 2 program in breast cancer.
If the Phase 1 data are replicated, this asset has a potential to be best-in-class, competing in a multi-billion-dollar market.
As this asset advances through the development process, our strategy is to have two potential blockbuster products geared toward solid tumors, specifically breast cancer.
Our sales team could be in the unique position of promoting both a best-in-class oncology therapeutic for breast cancer, and a novel GCSF with potential superiority data.
That would be game-changing for patients, customers, and shareholders.
Again, I thank you for your time and interest in Spectrum.
I'll now turn the call over to Dr.
<UNK>, who's going to provide more detailed information on our development advances.
Dr.
<UNK>.
Thank you, Dr.
<UNK>.
We continue to execute our business strategy of acquiring, developing, and commercializing products for unmet medical needs of cancer patients.
I believe the second part of this year will be a very exciting time at Spectrum.
We remain energized and focused on the milestones ahead.
We have the potential to have six drugs on the market by year-end, and multiple blockbuster drugs in development and third NDA filing in three years.
With that, let's open the call for questions.
Operator.
<UNK>, thank you for asking the question, and thank you for being here today for our call.
So, let me give you a very straight, simple answer.
As you know, that this is a biological where the endpoint is a blood test, neutrophil count.
So, these studies are powered ---+ they're small studies relatively speaking, between 500-600 patients.
The endpoint we powered at about 90% to show non-inferiority.
So, the studies are designed to be non-inferiority trials.
However, we have built in a superiority margin of profit margin as showing the superiority at 80%, powered to 80% to show the superiority.
And this is all about ---+ the endpoint, as you know, is DSN, the Duration of Severe Neutropenia.
And we have been working with the FDA for the last several months, we have gone through multiple iterations with the FDA, and then we decided that since there's so much riding for Spectrum on this drug, and there are multiple biosimilars on the market, multiple other things that are happening, people are discounting.
People think that Spectrum's drug, you know, they start wondering with the pegfilgrastim being the marketplace will be ---+ by the time we come to the market in 2018, the marketplace might be crowded.
So, we clearly, based on the Phase 2 data, that was exciting.
That we saw superiority in about 40 patients, 30 to 40 patients we saw superiority over pegfilgrastim, at a certain dose.
So, we discussed with the FDA, and we decided to pursue that line of thinking.
<UNK>, do you want to comment on that, <UNK> or <UNK>.
Sure, <UNK>, how are you doing.
I think first of all, let's say non-inferiority.
Non-inferiority allows us to compete very well and go after a large, large piece of the marketplace.
I think with any drug, if you have the potential to have the S word, Superiority, it puts you in an even better position all the way around.
Since the data in Phase 2 were so robust, we looked at that and said, why not at least power to 80% to potentially get superiority.
But, I'm very, very comfortable launching in the marketplace with non-inferiority.
Obviously, I'm in a much, much better position even to have more fun, and go after a larger, larger piece of the market with superiority, if that was the case.
And we think we have data that potentially shows us that.
So, <UNK>, I don't think you want to waste more time on Fusilev at this time.
Clearly as we have stated before, we have a generic competition introduced.
That is ---+ we are still selling a lot of units.
We're still, a lot of units of Fusilev are being sold, but every sales price for our drug has been decimated by the generic launch.
And therefore, we're not counting much on the revenue of Fusilev going forward.
<UNK>, yes, indeed.
So, we have done trials with three doses.
The earlier trials were done, we had ---+ there was a low dose, medium dose, and a high dose, and we have chosen a dose that is closer to the high dose than to the middle dose.
This is apaziquone, right.
Yes, so, the understanding that we have is, that FDA wants us to do a confirmatory trial.
You know, the understanding that we have is that we'd be able to submit the old 2 trial, 612, but you combine as you remember, each study alone is not significant for the statistical plans submitted with those protocols.
However, when you combine those two studies, then the data becomes highly significant.
So, those two studies combined are going to be treated as one study, and FDA wanted us to start another trial for which FDA's input has been sought and is being further certified by the SPA.
The understanding is that the FDA, we can file the NDA now, but FDA will not review it.
FDA will send it to ODAC, but will not send it until we have included enroll a majority of the patients in the new trial.
And, the understanding, the FDA said that if we approve your drug now, or review your drug application now, there's no way you can complete a placebo-controlled trial.
Let me remind you, the protocol that we are now planning to do is a placebo-controlled study.
And therefore, to answer your question, until a majority of the patients have been enrolled into this trial, the NDA will not be ---+ the ODAC meeting will not be held.
I'm sure some review in the FDA will continue.
So, I'll let Dr.
<UNK> and <UNK> both address this issue.
So, package insert, and labeling and cartons, those are the kind of things that are now expected to be finalized.
In fact, next week we will be addressing a group of KOLs in this area, so we are very actively pursuing this in anticipation of approval.
We are working very hard.
So <UNK>, I'll have either <UNK> or <UNK> comment on it, but I can tell you, think about this ---+ PTCL is a very small number of patients, and now there are multiple drugs on the market.
And keep in mind that Spectrum has the largest share of this franchise, between Folotyn and Beleodaq.
So, with this intro I would have <UNK>, <UNK>, talk about this.
Yeah, I'll take that one.
I think, if I look at our PTCL franchise overall, I'm thrilled to see double-digit growth both quarter-on-quarter and year-on-year.
But if I look at the product performance, the team's not satisfied with it, we expect it to be better.
But you also have to take into consideration that this is a 6,000 patient market, that we anticipate some variability in demand quarter-to-quarter, because it is a rare disease.
But like I said, when I see double-digit growth, that I like at the product level.
Something we're taking a deep look at, and expect to be better.
So, let's talk about Evomela.
Evomela, as soon as the approval comes, we plan to launch this drug as soon as possible.
It may take a couple of months, but I would think that we should be able to launch quickly after approval.
The market is already preparing, as I said, they're having already meetings with the ---+ they're identifying the markets where the growth is.
We are meeting all the people who treat transplant patients, and what-not.
About poziotinib, it's a little bit early in the sense that we are right now in discussion with key opinion leaders who have been involved with pen-HER inhibitors, others like Neratinib and what not.
So, even if right from the time of [Esco] where we had meetings, we have planned several meetings at this time.
So, let me remind you that poziotinib was developed by a company, our partner called Hanmi in Korea, and they had found activity in a variety of tumor types: in colorectal cancer; in lung cancer; in breast cancer; and in gastric cancer.
However, we ---+ based on the 60% response that we saw in breast cancer, we have decided to pursue only breast cancer in the United States at this time.
And since then, we have been focusing on breast cancer patients.
Not the kind of details you're asking.
I think it'll be premature for us to share with you what the design would be, what kind of cancer patients we'd go after, but clearly you can imagine that we have a lot of expertise.
Dr.
<UNK> Yang who will be ---+ who is heading the development group.
We have assembled both inside the company and outside the company, expertise in this field.
And you'll be hearing more about it as the time progresses.
Well, I would say to be determined.
Having said that, I'll share my experience with you in not only in oncology, but in drug development.
When statins were developed, were selling billion dollars each, Pfizer came back with Lipitor with $12 billion in sales.
Until that time, there were many drugs that were bringing ---+ Prevacol, Mevacor, from AstraZeneca's group, they were selling a billion dollars each.
And people thought, well, why would Pfizer come back with a fifth statin.
And the fifth statin came and became number one selling, any drug, ever in the world, $12.5 billion in revenue.
So, you know, in oncology, the increments, the improvements with drug treatment comes in small steps, and based on the data that we are seeing, and our experts are seeing, we think that our compound has a chance of being the best in class.
And therefore, we are very excited about it, and we want to take our time to design the right study, both with the blessing from the FDA, the European authorities, and experts on both sides of the pond.
Thanks, <UNK>.
At this time, we would like to thank you again for joining us on the call today, and your interest in Spectrum.
Our passion is to deliver better treatment options for patients suffering from cancer, and we believe with the team in place and our robust pipeline, we are well-positioned for future growth.
Thank you.
