SPPI
#Thanks.
Good afternoon and thank you for joining us today for Spectrum's Fourth Quarter 2017 Financial Results Conference Call.
Our press release is available on our website at www.sppirx.com.
Joe <UNK>, our CEO and President, will start the call today and provide an overview.
This will be followed by a financial discussion by our CFO, <UNK> <UNK>; and the discussion of our operations by our COO, Tom <UNK>.
During this call, we will be making forward-looking statements.
These statements are not guarantees of future performance and undue reliance should not be placed upon them.
Such forward-looking statements necessarily involve known and unknown risks and uncertainties, which may cause actual performance and financial results in future periods to differ materially from any projections of future performance or results expressed or implied by such forward-looking statements.
With that, let me hand the call over to Joe.
Thank you, <UNK>, and thanks to everybody for joining us on the call today and for your wanting to hear about Spectrum today.
This is my first call addressing you as the CEO of Spectrum.
It's an honor and responsibility that I'm humbled to have.
I thank the board for the appointment, and I want to give shareholders the confidence that I will drive this organization forward with the focus, discipline and accountability needed to take Spectrum to the next level of growth.
In addition, let me offer perspective on how we'll execute these quarterly calls moving forward.
I expect these calls to be concise, transparent and focused around the key drivers of our progress.
2017 was a breakthrough year for Spectrum, driven by significant advancements in our pipeline along with solid operational performance.
We continued to aggressively develop poziotinib and ROLONTIS, which puts us in a position to start 2018 with stronger momentum as we reach the important development milestones with both programs.
The milestones in 2018 will provide significant insight in unlocking the potential value of these assets.
Key goals for 2018 include, first the aggressive development of poziotinib for exon 20 insertion mutations.
This includes rapid enrollment of our multicenter study in non-small cell lung cancer, continued collaboration with MD Anderson and working with the FDA on an optimal regulatory pathway.
This year, we expect to have new and updated data on response rates, duration of response and PFS in both EGFR and HER2 exon 20 insertion mutations.
In addition, we believe there is strong clinical potential of poziotinib across solid tumors where exon 20 insertion mutations exist.
This is exciting.
Secondly, we plan to file the BLA for ROLONTIS in Q4 of this year.
We have made significant progress in our development with ROLONTIS, as we've just recently announced that we met the primary endpoint of our ADVANCE study, and we have completed enrollment in our RECOVER study.
We have over 600 patients enrolled in our Phase III program.
We recently announced top line data on 400 patients and the team is now focused on completing the trials and preparing the BLA package for submission by the end of this year.
I believe 2018 will provide and prove to be another important year for our exciting late-stage assets.
Now I'm going to hand over the call to our CFO, <UNK> <UNK>, to talk about the financials.
Thanks, Joe, and good afternoon to everyone on the call today.
I'll begin with some comments on revenue.
Total revenues for the fourth quarter were $28.6 million and of this, product sales were $27.9 million.
I want to provide some clarity around our 6 marketed products.
The strategy of the company has been to utilize the revenue from our commercial infrastructure to offset our development costs.
Our marketed products are small oncology, hematology drugs that are either late in their life cycle or developed under the 505(b)(2) pathway that is inherently competitive.
Aggressive discounting from the generics has virtually eliminated the margin in FUSILEV.
And as a result, we do not expect to sell much of this product going forward.
EVOMELA sales are also negatively impacted by pricing pressures associated with the new generic entrants in developed land market.
While we believe that we have a better product and will maintain a premium price, the pricing pressures are real, and we believe that fourth quarter sales are more reflective of what you will see from this product going forward.
As we look ahead to 2018, I expect product revenue to be between $90 million and $110 million due to the factors that I just described.
As we look ahead, we expect gross margins to improve driven by a new manufacturing process for EVOMEL<UNK>
We continue to expect R&D expenses to increase as we accelerate the spending on our pipeline drugs, poziotinib and ROLONTIS.
SG&A expenses were abnormally high in the fourth quarter due to a $7.1 million charge for onetime severance and legal costs associated with the termination of our former CEO.
We ended the year with $228 million in cash.
Cash burn for the quarter was $20 million, which included approximately $13 million burn from operations and $7 million with a burn from financing activities as we repurchased a portion of our debt, which was partially offset by some share reissuance.
With that, let me turn the call over to Tom.
Thank you, Tom.
Thank you also <UNK> and <UNK>.
And I'd like to now open it up to questions at this time.
I'll start, <UNK>, and how are you.
At AACR, we do know that there will be preclinical data presented on HER2 exon 20 insertion mutations from the MD Anderson trial, most of it being preclinical.
There may be a mention of the one compassionate use patient and actually in human, but for the most part, it's a preclinical presentation at AACR.
It's a great question.
Let's study the facts.
I know that from our trial, we won't have any data from the Spectrum trial, okay, to present this year, at least because we just started to enroll.
Now on the MD Anderson trial, because they own the data, I can't tell you if and when there'll be anything in between.
Now you've got to think of medical meetings, take a potential publications that could come up, but that will come out of MD Anderson.
For sure, I'm very confident, you asked for my confidence level, <UNK>, I'm very confident at World Lung that you will see data.
That for sure I think is a pretty sure bet.
<UNK>, I'll just add this.
We've done extensive research on ---+ and our homework on what it takes for breakthrough therapy, et cetera.
We certainly feel that potentially we meet those criteria, and we're going to work hard to go through the process to do just that, we hope.
<UNK>, I'll take the first part.
We will go around the horn here.
Thanks for the question.
One thing for sure, I think ---+ obviously, I'll have a different style.
I'll start with that, I think.
You always have a different style with different people.
I'm very data-driven, and I expect the company to make decisions based on science and data, and that's the way we will do it.
As far as our strategy goes with our 2 big projects, I was working on that in my old role as operations.
I think we have great strategies there.
We are executing very well.
I feel really good on enrollment.
I feel good about our work towards filing the BLA with ROLONTIS.
We're already doing everything we can to get that going in the right direction.
With poziotinib, as you know, our trial is enrolling.
We're going to be increasing our sites for poziotinib with the ---+ on the exon 20 insertion mutation, we just talked about, we hope to take all the right steps to get us to a therapeutic breakthrough designation, we hope.
So all of that is good.
I'm a guy who expects accountability.
I expect people to do their jobs, and I hold people very accountable.
One change I will mention, you may have seen the press release, we just added a person to the board.
This person has great expertise that I think we'll need.
He is an example of I think making the board better, by having somebody who understands both the reimbursement and has worked with the federal government extensively.
I think these are important factors as we go compete in these bigger markets.
So that certainly is something that's different.
And I just ---+ I have a very focused mentality.
And I will say we've made some changes in structure on several departments already and some people.
So in a nutshell, that's the first pass that we're doing, and I'm excited about where we're going.
I will let <UNK> now answer the second question.
Yes, thanks.
So, <UNK>, what we're trying to do is give you some sales guidance.
And then on the other areas, our guidance here is more directional in nature.
And it's going to be a function of how aggressively we can enroll patients.
So I think we will limit our guidance in the other items to what I'll call directional guidance.
I'll add <UNK>.
We did, at World Lung last year, we began discussions for KOLs in Japan.
As you may know that in Japan that the actual rate of recurrence is much higher for some reason in Japan.
So that's an important market for exon 20 insertion mutations.
And we've begun discussions with the KOLs in Japan, and they're pretty excited about it.
So that's good news.
Yes.
I agree.
I think Tom's spot on.
Yes.
Good question.
Actually, it's 33.
Ed, how are you doing, by the way.
There were 33 in the first cohort.
And you're right, it was at a 24-milligram dose, and it was 2 weeks on, 1 week off on the schedule, and we did switch to a 16 continuous.
So you're spot on.
Yes, we probably confused you a little bit.
When we said that nobody's been enrolled yet, that's on a new trial we're doing in second line with a T-DM1 and much sooner in the algorithm in the second line.
So that's what Tom meant by no enrollment yet.
We are currently enrolling in the Phase II third line at the new dose of continuous 16.
There will be data coming out sooner on the first cohort in Korea.
And I can't give you the exact date, but soon there will be the data released on the first 33 patients.
But keep in mind, the doses scheduled are going to be quite different on the second, and that's HER2-specific in third line breast cancer.
I'll will start and let Tom, because he's working on that.
First, I got to tell you when I speak to the people at MD Anderson who are working on this and have the background, they get out of their chair because they're excited about the non-small cell lung cancer.
But literally, they stand up and they get so excited, because what they have and they'll be publishing this at some time Ed, they have a lot of data that shows across many solid tumors that exon 20 insertion mutations are expressed in both EGFR and HER2.
Now it's different levels on all these different tumor types, but it's amazing how many of the solid tumors do show that.
And again, they're going to have some data come out on that.
So we are now working with MD Anderson and other KOLs designing that basket trial because this is really exciting, because we're madly excited about the non-small cell lung cancer opportunity here.
But this could open the floodgates to many, many more potential patients.
Tom, I don't know if you want to add anything.
Yes, it's a top priority.
I will let Tom talk about ---+ tell you about the search.
But we're actively looking.
And Tom, you want to give any update.
On a GAAP basis.
I mean, on a GAAP and non-GAAP basis.
