SPPI
#Thanks.
Good afternoon and thank you everyone for joining us today for Spectrum's third 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.
<UNK> <UNK>, Chairman and CEO; <UNK> <UNK>, President and COO; <UNK> <UNK>, CFO; Dr.
<UNK> <UNK>, Chief Medical Officer; <UNK> <UNK>, Chief Commercial Officer; and other senior members of Spectrum's management team.
Here's an outline of today's call.
First, Dr.
<UNK> will provide you with the highlights of the third quarter and discuss our overall direction and strategy.
<UNK> will then provide a summary of our third quarter financial performance.
Following this, <UNK> will review the company's operations, and Dr.
<UNK> will review the pipeline.
We will then open 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 involves 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 judgement as of the date of this conference call, November 4, 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 and 8-Ks and other SEC filings, and other important information, please visit our website at www.sppirx.com.
I'd now like to hand the call over to Dr.
<UNK>.
Thank you, <UNK>.
And thank you everyone for joining this afternoon.
Spectrum is in a great position to advance our late stage pipeline.
We have two drugs in clinical development with blockbuster potential.
One of these is ready to enter Phase 3 development soon.
With one other drug, we are ready to file an NDA by this yearend.
Unlike many of our peers, we have a commercial presence with five approved anti-cancer drugs and a sixth drug is under active review with the FDA.
The sales revenue helps us advance our pipeline.
Our portfolio of late stage drugs has never been as rich as it is today.
In the next several months we expect to make meaningful progress on multiple fronts.
As you have seen from our press release this afternoon, I'm very pleased to announce our co-promotion agreement with Eagle Pharmaceuticals.
With this deal, Spectrum has strengthened our position with key stakeholders.
<UNK> will go into more detail about how this co-promotion will help build a bridge to achieving our vision to grow the company in the coming years.
Now let's talk about SPI-2012, which is the highest priority at Spectrum.
This novel long-acting G-CSF, a granulocyte-colony stimulating factor, targets a blockbuster market and has the potential to change the face of our company.
It has shown strong efficacy in Phase 2 studies.
We are taking several steps to help ensure the success of this drug in the long term.
To ensure alignment with the FDA, we are pursuing a special protocol assessment, or SPA, before initiating the Phase 3 trial.
Following a very productive meeting with the FDA last week on this subject, we now plan to initiate the pivotal program soon, as soon as the agreement on this SPA is reached with the FDA.
Moving on to apaziquone, our drug for non-muscle invasive bladder cancer, we recently gained agreement with the FDA on an additional Phase 3 trial for apaziquone under the SPA.
Last week we announced that we initiated this trial and have treated the first patient.
We are looking forward to filing the apaziquone NDA before the end of this year, based on previously completed Phase 3 studies.
Regarding our novel formulation of melphalan, Evomela, we received a complete response letter recently.
We asked for a type A meeting with the FDA, and are pleased with the swift scheduling of the meeting for this Friday, November the 6th.
We remain committed and confident to bring Evomela to the market for patients and plan to work closely with the FDA to accomplish that goal.
Now on poziotinib, which we believe has the potential to be the best in class pan-HER inhibitors.
We expect to file an IND with FDA later this month, and are set to start the Phase 2 trial assessing poziotinib's potential in breast cancer.
In addition, our partner Hanmi, is conducting several Phase 2 trials in various indications.
We expect to see interim data from our partner's breast cancer study at the San Antonio Breast Cancer Symposium next month.
I'm pleased with our continued commitment to fiscal discipline at Spectrum, and we're expecting to end this year with a stronger cash position than our prior expectations.
<UNK> will talk more about our operations, and <UNK> will provide you more details about our financials, and Dr.
<UNK> will provide a clinical update.
Now let me hand over the call to our Chief Financial Officer, Mr.
<UNK> <UNK>.
<UNK>.
Thank you, Raj.
And good afternoon everyone on the call today.
I want to just highlight a few items in our financial results.
Third quarter product sales were $28.5 million.
As expected, sales of Fusilev continue to be impacted by generic competition.
During the quarter we recognized the $7 million of Fusilev sales that had previously been deferred in the first quarter.
Separately, we recorded $10 million in additional deferred revenue for product shipped in the third quarter that didn't meet our revenue recognition criteria.
The deferral is due to the difficulty of estimating rebates that we will be offering to compete with the generic products.
We currently estimate that we will be able to recognize those shipments as sales later in the fourth quarter and in the first quarter of 2016.
One additional item to note is that our cost of goods sold as a percent of sales is higher than usual for two reasons.
First of all we purchased a strategic supply of ZEVALIN, which required additional stability testing.
And second, we recognized the cost of goods sold for the Fusilev deferred revenue.
So although we had to defer the revenue for a portion of the Fusilev units that were shipped in the third quarter, we are required to recognize the cost of goods sold because we've shipped the product to the wholesaler and title has passed.
Additionally, based on our most recent projections, we are raising our guidance and now expect to exit 2015 with cash of more than $125 million.
This is up from our previous guidance of $110 million that we provided last quarter.
This guidance excludes any impact from business development deal, and as a reminder, the Eagle contract has no impact on cash in 2015.
Now let me hand the call over to <UNK> to provide an operational update.
Thank you, <UNK>.
Thank you, Dr.
Raj and <UNK>, and most of all thanks for everybody's interest who is on the call.
As we move into the last few months of 2015, we remain energized and focused, and we have many key milestones upon us.
Let me start with our highest priority in the company, SPI-2012, our long-acting G-CSF that's novel.
There has been additional clarity about this marketplace with the launch of a biosimilar for the short-acting G-CSF.
Now having further clarity on pricing trends and reimbursement pathways, we feel even more confident that we can successfully compete with a novel agent in a market with revenue that was above $6 billion in 2015.
This is an important endeavor for us, and want to make sure everything goes well.
As we shared in the last earnings call, we are currently pursuing a special protocol assessment for our Phase 3 program.
It's important to remember that this study, unlike many clinical oncology trials, has a very short-term registrational endpoint addressed 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.
Moving over to Evomela.
We were surprised to receive a complete response letter, though we continue to be confident on final approval.
We were encouraged that the issues were non-clinical in nature.
We requested and have already received a type A meeting with the FDA this Friday, and we look forward to resolving their issues very rapidly.
In addition, the team is currently working on filing the NDA for apaziquone, our potent tumor activated prodrug for bladder cancer.
We're happy to announce our first patient was enrolled in our Phase 3 trial at the end of October under and SPA agreement with the FDA.
Dr.
<UNK> will provide more details around the trial shortly.
The overall cost of treatment of bladder cancer in the US is a staggering $3.4 billion annually, and most of this cost is related to direct treatment of the disease.
We're hopeful that we can get this drug to market as soon as possible to meet the significant unmet medical need.
Last but certainly not least, we are excited to advance poziotinib in a US-based Phase 2 program in breast cancer.
Despite the availability of several HER-2 targeting molecules, breast cancer patients continue to need additional therapeutic options.
Based on early data, this asset has the potential to be a best in class product, 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 towards solid tumors.
We are moving forward and I love the potential to meet this important unmet medical need.
These are exciting times.
The development of our potential blockbuster assets are progressing and their potential benefit to cancer patients are on the horizon.
In the near term, you heard <UNK> mention the decline in our product sales mainly driven by the decrease of Fusilev due to generic competition.
While this was an expected reality, we now find ourselves with a talented sales team that has excess capacity with the loss of Fusilev.
It's for these reasons that the timing of the Eagle co-promotion couldn't be better.
The co-promotion agreement will be executed by our 32-person corporate account sales team, plus commercial infrastructure that's currently promoting Fusilev.
The remaining sales people will be focused on our PTCL, [ALL] and follicular NHL focused brands.
The co-promotion agreement comes with an initial term of 18 months, beginning on January 1, 2016.
It includes a $13 million base fee, and up to $9 million in identified milestones over the 18-month period.
The agreement includes the commercialization of up to six of Eagle's products, including current pipeline development assets, as well as those that may be licensed in over time.
Our co-promotion with Eagle fills several gaps in the near term.
Most importantly, it enables our team to launch exciting assets into this space that we know so well.
It will allow us to further demonstrate our commercial fortitude while bringing important medicines to patients.
Next, this agreement will provide an opportunity to cover our expenses while generating revenue and additional cash over the term of the contract.
Last, as our development pipeline matures in the near term, this co-promotion agreement with Eagle will engage our people, enhance shareholder value, and will help to build a bridge to achieving our vision to grow the company in the coming years.
<UNK> <UNK> who will provide you more detailed information about our development activities.
Thank you, Dr.
<UNK>.
To conclude, I would express my enthusiasm about how well positioned our company is.
We have a strong pipeline with several catalysts in the near term.
In addition, we have the commercial business which has now been fortified by the prospect of near term product launches through the Eagle deal.
With that, let's open the call for questions.
Operator.
So, Ad, thank you for your question.
As we have stated before, the goal of our study is non-inferiority.
However, the study is powered to show superiority, powered at 80% to show superiority, and over 90% to show non-inferiority.
So the objective of this study has not changed.
And as Dr.
<UNK> stated, we are awaiting final word from the FDA, which we expect to come shortly.
So, with that question, I would like to ask <UNK> or <UNK> to comment on this.
Yes, I'll comment and have <UNK> comment too.
You know, I'm more excited now because, you know, we were all speculating, right.
We've all been sitting back watching, okay what's going to happen when biosimilars actually come.
What's going to happen through legislation.
How is it going to be paid for.
And I'm excited the way it's done, <UNK>, because the way it's done now is the innovative product is why ASP will be developed through their pricing strategies and their decisions.
All biosimilars will be tethered to that innovative product.
And because of that, for example when you look at the short acting drug that's out there today, the new product that came out is about 15% less than the current product, the innovative product.
So now the innovative product has to think about what kind of price action do I take because the ASP is linked to there and you're paying less for the other.
I hope that makes sense to you.
So, what I like about our prospects is we are a novel product.
And the way things are today, a novel product would be on its own.
We wouldn't be tethered to the innovative product, putting us in a position to control our own destiny, make the decisions we have to, (inaudible) can be very flexible on what we do with our pricing strategy.
So I really like that position.
<UNK>, do you want to comment.
<UNK>.
So, <UNK>, thank you for your question.
We had actually, as you know, we had completed two trials before and nearly 90 sites were involved in US and Canada.
So all of these sites have been working with us.
We are in the process ---+ we have finalized at least 30 plus sites as we speak.
And the first patient, as I said, as Dr.
<UNK> said, has already been started.
Several patients are in screen.
And at least 20 to 30 sites are active as of today.
However, we have about 80 to 90 sites that have agreed to participate in the protocol.
So as the time progresses, more and more sites will be adding patients to the study.
Dr.
<UNK>.
Thank you.
As you can see, we are going to be very, very busy over the next several months.
Our plate is full.
We have many regulatory clinical and commercial milestones in the near term.
And we look forward to updating you [of our days] in the near future.
Thank you for being on the call with us today.
Goodbye.
