SPPI
#Good day, ladies and gentlemen, and welcome to the Spectrum Pharmaceuticals, Incorporated fourth-quarter 2015 financial results conference call.
(Operator Instructions) As a reminder, this conference call is being recorded.
I would now like to turn the conference over to our host for today, <UNK> <UNK>, Vice President of Strategic Planning and Investor Relations.
You may begin.
Thanks.
Good afternoon, and thank you for joining us today for Spectrum's fourth-quarter 2015 financial results conference call.
I am <UNK> <UNK>, Vice President of Strategic Planning and Investor Relations for Spectrum Pharmaceuticals.
With me today are Dr.
<UNK> <UNK>, Chairman and CEO; <UNK> <UNK>, President and Chief Operating Officer; <UNK> <UNK>, Chief Financial 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 [fourth] quarter and discuss our overall direction and strategy.
<UNK> will then provide you a summary of our [fourth-quarter] financial performance.
Following this, <UNK> will review the Company's operations and clinical update.
We will then open the call for 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 the future events of Spectrum Pharmaceuticals, including statements about 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 date of this conference call, March 9, 2016, 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 would now like to hand the call over to Dr.
<UNK>.
Thank you, Dr.
<UNK>, and good afternoon, everyone on the call today.
Let me begin with some color on our product sales.
Fourth-quarter product sales were $34.8 million and for several of our drugs was solid this quarter and resulted in strong quarter-over-quarter sales growth.
FUSILEV sales were $15.1 million, compared to $11.1 million in the prior quarter.
Our reported FUSILEV sales do not include $6.1 million in deferred revenue that we expect to recognize in 2016.
FUSILEV sales exceeded our expectations in the fourth quarter; however, we continue to expect significant declines in the future, due to additional competition and pricing pressure.
FOLOTYN and BELEODAQ sales were $13.3 million, compared to $11.3 million, and MARQIBO sales were $2.7 million, compared to $1.3 million in the prior quarter.
Also, ZEVALIN sales were $3.7 million, compared to $4.8 million in the prior quarter.
And remember we are no longer booking revenues from ZEVALIN in certain ex-US territories.
I also want to highlight a few points regarding our business development activities.
Earlier in 2015, we in-licensed our pan-HER drug, Poziotinib, from Hanmi Pharmaceuticals.
It was great to see that this product has already entered Phase 2 clinical trials.
One of the decisions we made last year was to try to monetize the value of certain assets in non-core geographies.
I am pleased with the recent deals that we've signed in China, Japan and Canada for various assets.
All of these deals extract value for these assets above and beyond what we could have realized on our own.
In addition to the licensing activity, we also signed a co-promotion agreement with Eagle Pharmaceuticals.
This agreement covers the expenses of the team working on Eagle products, with the potential to earn performance-based milestones based on sales.
So let me make some comments on our cash position.
I'm pleased to report that we ended the year with a cash balance of $140 million.
This is more cash than we started the year with.
We will continue to be mindful of our operating expenses and make sure we are funding only our highest priority programs.
Our plan is to have our operating performance and business development activities be our primary source of cash.
As we look forward to 2016, I want to provide some perspective on our operating expenses.
Our quarterly SG&A expenses have stabilized around $20 million, down from approximately $25 million a year ago.
We don't expect significant changes from the current levels going forward.
As we've previously stated, we continue to expect R&D expense to increase over the year, as we increase enrollment of our clinical studies.
The rate of this ramp will be a function of how quickly these studies enroll.
With that, let me now hand the call over to <UNK> to provide an operational update.
Thank you, <UNK>, <UNK>, and Dr.
<UNK>, and most of all, thank you for everyone on the call today and your interest in Spectrum.
I'm extremely proud of our team here at Spectrum and the goals that we accomplished in 2015.
Our commercial and operations team has done a great job with [undis] products, resulting in a strong operational performance in the fourth quarter.
What I really want to focus on today is our late-stage pipeline, a pipeline that is real and which is a rarity in the biotechnology industry.
In this industry, everybody is looking for drugs that can compete in blockbuster markets, drugs that can potentially be game-changers for the treatment of devastating oncology ailments.
We're fortunate to have several potential game-changers for our Company in our pipeline.
Let me tell you what makes me so enthusiastic.
I will start with our highest priority in the Company, SPI-2012.
This novel long-acting GCSF, a granulocyte-colony stimulating factor, targets a blockbuster market of more than $6 billion.
Our Phase 2 data demonstrated that SPI-2012 was not inferior to pegfilgrastim at the mid-dose tested, and superior in terms of duration of severe neutropenia at the highest dose tested.
We are excited to announce the agreement on our special protocol assessment with the FDA on the Phase 3 study in December, and within six weeks, we started to enroll the first patient into that registrational trial.
The trial is randomized, controlled, and it will evaluate SPI-2012 as a treatment for chemotherapy-induced neutropenia, with a target of 580 breast cancer patients.
We are currently recruiting patients in this trial, and patients are beginning to get dosed.
With this as our top development priority, it's important to remember that this registrational trial, unlike many oncology trials, has a relatively short registrational endpoint, assessed by blood testing of absolute neutrophil counts over the course of a couple of weeks.
Our plan is to rapidly enroll this important study within approximately 18 months, quickly analyze that data, and then expeditiously file the BLA.
I was recently present at a meeting with the investigators who will be participating in this trial and am pleased to inform you that the excitement for this drug remains very high.
Let's move on to another high priority in the Company, Poziotinib, our novel pan-HER inhibitor.
We believe Poziotinib has the potential to be a best-in-class product.
It has demonstrated strong Phase 1 clinical data in breast cancer patients, with a response rate of 60% in patients who had already failed other HER2-targeted treatments.
Our Korean partner, Hanmi, is studying this drug in several mid-stage studies in several tumor types, including breast cancer, non-small cell lung cancer, gastric cancer, in Korea.
We are focusing our efforts in breast cancer because of the exciting data we have seen from this compound.
Poziotinib will target a multi-billion dollar market, and we are working with the top KOLs worldwide to develop a clinical strategy so we can have a competitive drug in the market.
In December, we submitted a Phase 2 breast cancer protocol to the FDA as part of our IND, Investigational New Drug, application.
We're happy to report the IND was accepted, and just this week, we started the Phase 2 study in breast cancer.
The Phase 2 study is an open label study that will enroll approximately 70 patients with HER2-positive metastatic breast cancer who have failed at least two or more HER2-directed therapies.
We will keep you updated in the progress of this exciting drug.
Next, Evomela, after our meeting with the FDA in November, we resubmitted our IND application within days, and the FDA granted us a new PDUFA date of May 9, 2016.
We've received positive feedback from KOLs at the American Society of Bone Marrow Transplant annual meeting in February.
This market is very concentrated, with just over 100 accounts representing about 90% of that business.
We're only two months away from the PDUFA date today, and our commercial team is actively finalizing their launch preparations.
If approved, we will bring this drug to market with our existing sales force.
Now let me talk about EOquin, our potent tumor-activated drug for bladder cancer.
Just last month, we received communication from the FDA that they have accepted our NDA filing and provided us with a PDUFA date of December 11, 2016.
The FDA also indicated that it plans to hold an advisory committee meeting regarding this NDA.
Thank you for your time and interest in Spectrum.
I am going to turn the call back to Dr.
<UNK>.
Thank you, <UNK> and <UNK>.
I now want to thank you for all your interest in Spectrum.
We have multiple potential catalysts in 2016 and a promising late-stage pipeline.
In the next two months, Spectrum potentially could have six drugs on the market, while we keep aggressively progressing our high-priority programs.
With that, let's open the call for questions.
Operator.
<UNK>, first of all, thank you for your question.
Very important question for our most important product.
The protocol, as you know, was approved by the FDA under special protocol assessment.
Although study is a full four cycles ---+ multiple cycles, but the first cycle, which is a four-week cycle in which they will be assessing the activity of SPI-2012 in a randomized open label fashion.
In other words, the patients will be randomized to receive either the comparative drug pegfilgrastim or SPI-2012.
And the blood assessments will be done about 12 times during the cycle.
After the TC regimen finishes, they will start on the G-CSF, either our drug or the competitive drug, and the assessments for efficacy will be a duration of severe neutropenia, or DSN, during this first cycle only.
Let me repeat, this study is not double-blinded.
It is randomized but open label study.
I think that decision we will make with the help of our counsel (inaudible) and even with the FDA.
Keep in mind, this is a very important drug for us, very important study.
We would not want to do anything to jeopardize the approvability of this study.
Certainly this is a randomized and open-label trial, so you're right, we would ---+ it is possible that we would know the results on an ongoing basis.
However, whether we make this data public or not will depend on the FDA's and DSM's decision.
And we will keep you posted as we progress.
Right now, our goal is to have 100 to 150 sites in US and Canada participate in the trial.
This will be mostly an American study in 580 patients.
Our goal is to enroll these patients as quickly as possible, but in 18 months or less.
We plan to have this drug on the market in 2018.
This class of compounds typically have side effects related to diarrhea, rash, mucositis, those are the typical three side effects that you see with pan-HER inhibitors.
We have seen a little bit less incidence of diarrhea with this drug.
However, so far the number of patients studied is rather small.
This is why FDA requires you to do large trials to really assess the incidence of the disease.
We are planning to treat patients with loperamide as prophylactic for diarrhea.
Let me tell you, our partner, Hanmi, has treated now a lot of patients.
I don't have the exact count.
The number of patients far exceeds 100, I would think, in different tumor types.
There were six tumor types in the study.
Besides what <UNK> mentioned, the gastric cancer, lung cancer, head and neck cancer and breast cancer.
We decided to pick breast cancer because, number one, this is where we saw the most activity and it is the biggest market in the United States.
And, therefore, we have focused that Spectrum is going to focus primarily on the development of this drug in breast cancer.
However, our partner is rapidly enrolling patients, in fact, they are far ahead of us, they are in late stage of Phase 2 trials in Korea.
We are quite excited with what they're doing.
We believe that both SPI-2012 and Poziotinib could be transformative for the Company, even if one of them makes it.
We're hoping that both of these drugs are likely to make it, based on the clinical data that we have at this time.
They did not.
To best of my knowledge, in Phase 2 trials they did not use prophylactic.
In fact, the San Antonio, during the breast cancer symposium we had a meeting of about 12 experts in the United States and several experts from Korea and at that time we did have a lot of discussion on prophylactic use of this drug.
The American experts felt that we should use prophylactic use of these drugs just because these class of drugs are known to cause diarrhea.
But in Korea, they have not used it.
Let me repeat if I understand your question correctly.
You're saying what are the market opportunities for a drug like Poziotinib.
Let me just tell you that breast cancer is ---+ about 2,000 women are being diagnosed every month with this drug ---+ [40,000] women are being diagnosed literally every month with this terrible disease called breast cancer.
240,000 a year.
And 40,000 of them die each year in spite of all the advances we're making.
It is a huge market when you look at it.
Unfortunately, it is a huge market from patients' point of view.
I'm a physician and I always think of patients having a terrible disease like breast cancer.
Here it is, [conceptor] sales are $7.8 billion, as reported just last year.
Just one such drug.
There are many drugs in development at this stage; it's a highly competitive field.
We believe we have got perhaps a best-in-class pan-HER inhibitor based on the data we have seen so far.
Time will tell.
We are right now in second Phase 2 trials.
We plan to do a 70-patient study.
We plan to quickly enroll these patients and we will have more to say about as the time goes.
If I understand your question is about EOquin, apaziquone, a bladder cancer drug, but the FDA is likely to wait for the current trial, ongoing trial, to be completed.
That's a question I can't really answer.
As you know, we have submitted data based on three things.
Number one, we know that our drug is active, based on not only the marker legion of studies that are very impressive that you leave a tumor behind and the only thing you give to these patients is give a single dose of EOquin and 69% patients had complete responses.
And then the Phase 3 trials that we did, 611, 612, we saw the drug was extremely safe and for the technical reasons we have done reanalysis.
We have submitted to the FDA.
As you know, when we studied, each study was not positive.
P value was not less than 0.05.
However, when we combined the two trials, then the study data was highly significantly positive.
And this unmet medical need, no drug has been approved in this space and when we talked to experts, we believe that this unmet medical need, in fact, the only other drug that is used in Europe, for example, is Mitomycin and in some of the Centers.
And Mitomycin is, as you know, causes sloughing of the healthy tissues, so urologists are very afraid to give a drug like Mitomycin which is very toxic.
As compared with that, in our experience of treating, conducting two large studies with over 600 patients each, we found that there were drugs relatively safe and we feel good about it.
I know you're interested in Fusilev question.
We have actually moved on.
We don't talk much about Fusilev.
Fusilev is a drug that has given significant contribution to our sales revenue.
We know there is generic competition from Sandoz and now there is a second entrant, so it is really hard for us to predict at this time how these sales are going to be in the future, but we are expecting that the sales of Fusilev will continue to decline.
Yes.
Yes.
Sure.
That is in the licensing revenue line.
That's the revenue we recognized from selling off our Japanese entity.
It's a one-time sale of that entity.
Yes.
We actually will recognize revenue in the first quarter.
The way that this will happen is the sales force that is promoting this product, we get reimbursed on a quarterly basis for their time.
So you will see that show up in the licensing revenue line on a quarterly basis.
And it's about $8 million a year, so a couple million a quarter.
Let me have this question be answered by <UNK> and <UNK>.
<UNK>, you're exactly right.
I will start and <UNK> ---+ we were just talking about this this morning.
A couple of things and I will let <UNK> go into detail.
You're spot on, <UNK>.
It's number one.
We are a novel entity.
We are not a biosimilar.
Sometimes people are confused about that.
The way legislation is is we will be standing alone, we are not tethered to the innovative product, as you well know.
Now changing ---+ the only comment I will make and I'll let <UNK> comment in more detail.
Remember, the change in the ASP you're talking about, the potential that is only on Medicare patients only.
It's not on the private pay which is usually more than 50% of those patients.
That's important when people do their modeling, you understand that.
<UNK>, why don't you ---+ we talked about this this morning, why don't you give your explanations because you're the commercial guy.
That's exactly right.
The only thing I will add is any way you slice this, at the end of the day it becomes a game-changing event for us and we are in a position to compete.
<UNK>.
I think we will try to provide as much color as we can.
We try to provide some color here on the trends that we're seeing in the business with regards to the SG&A line staying rather constant and the growth that we expect in the R&D line, and so we will try to provide as many updates to you as we can throughout the year.
The only comments that we're going to make right now are really about our operating expenses and where we see those.
We're not prepared to make any comments today around our cash balance.
I will just say one more comment here that keep in mind that we have some assets that we're focused on developing them in the US.
We are looking to find a partner in Europe.
We haven't even started the process yet, but we have been thinking that for drugs like EOquin apaziquon, [SPI-2012], which have mature drugs in later stages, at this time we could entertain a partnership with somebody in Europe or elsewhere.
Certainly, as you have seen, that we are very active in [BD] space.
We acquired company like [Allos] and others and we have been acquiring drugs and we have made partnerships before and we are very open to make some additional partnerships.
You just saw that we brought in over $26 million last year by doing some strategic business development deals and we hope that we will be able to do this year and next year and so on and so forth.
Once again I would like to thank everyone on the call.
As we enter 2016, as you can see, we remain very focused and dedicated to patients in need of new treatment options.
We look forward to updating you in the near future on the progress that continues at Spectrum.
We are quite excited.
These are the exciting times at Spectrum.
Stay tuned.
