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Good afternoon and thank you all for joining us today for Spectrum's first-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; Dr.
<UNK> <UNK>, Chief Medical Officer; Tom Riga, Chief Commercial Officer; and other senior members of Spectrum's management team.
Here is an outline of today's call.
First, Dr.
<UNK> <UNK> will provide you with the highlights of the first quarter and discuss our overall direction and strategy.
<UNK> will then provide a summary of our first-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 at 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, 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 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 now would like to hand the call over to Dr.
<UNK>.
Thank you, <UNK>, 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 four most exciting pipeline assets.
First, SPI-2012 remains our highest priority in the Company.
At our analyst day on March 13, we shared the key Phase 2 data which demonstrated impressive efficacy and safety of our compound.
If approved, this drug will compete in a worldwide market currently over $6 billion annually.
The Phase 3 protocols have been developed in collaboration with both US and European regulatory agencies, and we are now busy selecting investigators and qualifying sites at this time.
Secondly, I'm impressed with the clinical data with poziotinib, an oral irreversible pan-HER inhibitor currently in Phase 2 trials.
With best-in-class potential, we believe poziotinib will successfully compete in a blockbuster market for which we have worldwide rights, excluding Korea and China.
Poziotinib has shown single-agent activity in Phase 1 trials for the treatment of various cancer types, including breast, gastric, colorectal and lung cancers.
We look forward to results from several ongoing Phase 2 trials with this drug.
We are especially excited about the prospects of this drug in breast cancer where the early clinical data is very strong.
We, therefore, are working to quickly develop our clinical programs to get this drug to patients in the United States as soon as possible.
Third, we are making progress on apaziquone, a potent tumor-activated prodrug for bladder cancer.
There is a high unmet need in non-muscle invasive bladder cancer, and apaziquone has shown promising data in a previous Phase 3 program.
In consultation with the FDA, we are now finalizing a protocol for an additional clinical trial.
And soon after initiating the trial, we plan to file an NDA with the FDA before the end of this year.
Finally, I would like to highlight our propylene glycol free Evomela, whose NDA is currently under active review by the FDA.
The PDUFA date for this drug is October 23, 2015.
In February, we presented pivotal data that supports the safety and efficacy of Evomela in patients with multiple myeloma undergoing transplant.
Evomela has increased stability, which allows it to have a longer use time, which in turn simplifies clinical administration.
Once approved, we plan to launch this drug using our existing salesforce.
Additionally, we remain active on the business development front.
As I just mentioned, we already completed one asset acquisition this year, and we continue to evaluate out-licensing and other in-licensing opportunities that can position us extremely well for long-term growth.
Before I hand this call over to <UNK>, our Chief Financial Officer, I want to express my confidence is unwavering, despite the fact that we have competition for Fusilev and expect significantly [devilish] revenue this year.
We have been aware of this potential decline in sales and have planned for this eventuality.
We remain focused on our long-term strategy.
For over a decade now, Spectrum has been dedicated to advancing oncology treatments with passion and commitment.
We are now focused on the two drugs in our pipeline that have blockbuster potential, and have a base commercial business to help fund our development stage assets.
I'm excited about the potential for further growth and a promising future for the Company.
Now let me hand over the call to our CFO, Mr.
<UNK> <UNK>.
And after <UNK>, Mr.
<UNK> <UNK>, our President and Chief Operating Officer, and Dr.
<UNK> <UNK>, our Chief Medical Officer, will provide you further details on our pipeline.
<UNK>, please.
Thank you, <UNK>.
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 exclude $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 these shipments as actual sales later this year.
The $38.4 million in 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 two things.
First of all, we took a one-time non-cash impairment charge of $7.2 million for Fusilev based on our expectation of lower revenues going forward, given the launch of a generic levoleucovorin.
This was recorded in the amortization of intangibles line and won't repeat in future quarters.
The second thing I want to point out is that we've taken a hard look at our budget and have cut or delayed funding to programs other than the key programs that we are highlighting here today.
Based on the actions we have taken to manage our costs, we expect to exit 2015 with cash and cash equivalents of more than $100 million, excluding any new business development activities.
I look forward to providing you updates on our progress over the course of the year.
And with that, let me now hand the call over to <UNK> to provide an operational update.
Thank you, <UNK>; thank you, <UNK> and Dr.
<UNK>, 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 are 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 are moving with urgency to capitalize on it.
Spectrum is well-positioned for long-term growth.
Let me provide you with an update on our commercial business, starting with Fusilev.
As you all may know, generic leucovorin entered the US 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 [Ph-ALL] 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 will 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 are 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 leads 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 salesforce.
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.
Jeff Vacirca who is a prominent medical oncologist.
He shared the key Phase 2 trial data that made our decision to move forward into Phase 3.
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 3 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 sent the final protocol to the FDA.
We are 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 are 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 biologic a success for patients, practitioners, shareholders and for Spectrum.
Lastly, I would 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 billion-dollar brands, and current development companies are valued in the multibillion dollar range.
While early, our Phase 1 data has us very optimistic about the future potential of this asset.
<UNK> will provide more details shortly, as our team are working aggressively to develop this product.
I'm confident in Spectrum's future through this unique and desirable position.
<UNK> <UNK>, our Chief Medical Officer.
Thank you, Dr.
<UNK>.
Let me conclude by reminding all of you that we remain very excited and energized about 2015, in spite of significant declines 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 salesforce.
We plan to make all of this progress in a fiscally prudent manner so we can exit the year with a strong financial position.
With that, let me open the call for questions.
Operator.
Let me take your first question, and then I'll have <UNK> 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 two studies of 506 patients randomized against pegfilgrastim.
And this will be ---+ the efficacy of the drug will be based on really first course of treatment, 10 days of dosing ---+ one dose and then 10 days of evaluation of the blood samples.
We have taken this protocol and submitted to the FDA and, in fact, the FDA is currently discussing and we will be able to comment later once we have 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.
So the program that we had initially designed included 500 patients in each of the two trials.
However, our meeting with the 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, 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 <UNK> to comment upon the second part of the question.
Great.
So <UNK>, I hope you are happy.
I think that we are trying to provide a little bit more color for you.
I think your question is a good one, and what we are trying to provide is the fact that we have sufficient cash and resources and are making the appropriate prioritization decisions within the pipeline to make sure that we fund these programs that we've highlighted today and make sure they are adequately funded.
With regards to how far out we are going to provide that guidance, at this point I am only in a position to tell you about where we plan to in the current year.
And we certainly have sufficient cash to aggressively fund these four programs that we've outlined today and still close the year with greater than $100 million in cash.
Beyond that, we are just not at a point here where we can talk about that.
So <UNK>, let me try to answer this question.
So we have been in litigation for some time.
This has been known to us for some time that there is a generic levoleucovorin.
NDA 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 second quarter.
I believe it was on a certain date in April, middle of April.
And the dates that my head of legal team is showing me here is 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.
Well, let me give some preamble here before <UNK> gives you a better answer.
Listen, the Fusilev decline in revenue was well-known to us.
No drug lasts forever.
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 with $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, <UNK>, that we have been de-prioritizing projects that are less sure, that would take a long time, and we have been focused on the products that add more value and could be quickly on 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 one dose over the next 10 days, we know how the neutrophil count is.
Duration of severe neutropenia is the endpoint.
So these are studies we are very pleased to see the relatively ---+ the studies of our major drugs will be of short duration and, therefore, less expensive.
So with this, I will have <UNK> add some more color for <UNK>.
<UNK>, I think the 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 the 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 the fact is we knew this was going to happen.
As <UNK> said, we de-prioritized the program and we're going to make sure that we fund these high-priority programs with everything we have.
But you are absolutely right, we've taken a hard look at the operating expense and we are going to make cuts where we need to.
<UNK>, you know we acquired the rights to poziotinib from our partner Hanmi in Korea.
And when we acquired, we saw the data of Phase 1 and we saw that there were at least six Phase 2 trials that are underway.
They are in various tumor types, including breast, gastric, colorectal, and some of those trials ---+ and lung.
So there are four indications in which these trials have been ongoing.
And some of the data ---+ 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.
<UNK> pointed out to you that we are planning to start US Phase 2 trials before the end of this year.
And mind you, all the programs that is currently running the six Phase 2 trials, we are not paying for those trials.
They are still being paid and will be paid by our partner.
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 endpoint of the trial was relapse rate at two years.
And when you look at relapse rate at two years, we missed significance in each of those two studies, which were 500 patient trials.
But when you combine the two studies, the data was highly significant at p-value 0.017.
So we took this 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 two trials and incorporate them into the new protocol.
For example, when we look at our analysis of the earlier trials, we did not see significance at two years, but data was highly significant at 18 months, 12 months, 6 months.
So one of the major changes in the protocol for the new trial is that we are looking at time to relapse rather than relapse at two 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 two 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 and US, they are all excited and ready to work with this new protocol.
This is another thing we learned, that this drug is deactivated by an enzyme that is present in the red blood cells.
So, therefore, we have now decided in consultation with the FDA that patients with frank bleeding after TUR will be excluded from the analysis.
In fact, if we go back and do the retroactive analysis of the two 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 two years.
However, we decided that in the new protocol we are going to ---+ our priority (inaudible) plan to exclude those patients from analysis, and FDA has agreed with that.
Again, 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 to be presented by the investigators, but Spectrum is not sponsoring any of the presentations at this ASH meeting ---+ I mean the ASCO meeting.
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 with the team in place and a robust pipeline, we are well-positioned for future growth.
