Spectrum Pharmaceuticals Inc (SPPI) 2005 Q2 法說會逐字稿

Good day everyone and welcome to today's Spectrum Pharmaceuticals second quarter 2005 financial and operating results conference call. Today's conference is being recorded. At this time for opening remarks and introductions I would like to turn the conference over to Laurie Little, Senior Director of Investor Relations. Laurie, please go ahead.

Thanks Laurie. Good morning everyone and thank you for joining us today to discuss Spectrum's second quarter 2005 financial and operating results. With us on today's call are Dr. Raj Shrotriya, Chairman, CEO and President of Spectrum Pharmaceuticals; Shyam Kumaria, Vice President of Finance and Dr. Luigi Lenaz, our Chief Scientific Officer.

Before we begin I'd like to state that during this call we will be making forward-looking statements regarding future events and the future performance of Spectrum Pharmaceuticals that involves risk and uncertainties that could cause actual results to differ materially. These risks are described in further detail in the company's report filed with the Securities and Exchange Commission.

These forward-looking statements represent the company's judgment as of the date of this conference call and the company disclaims any intent or obligations 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.

Our 10Q was filed today with the SEC and our press release was released earlier this morning. For the 10Q earnings press release or the corresponding AK and for additional information including SEC filings, visit our web site at www.spectrumpharm.com. Now I'd like to turn the call over to Dr. Raj Shrotriya. Raj.

Thank you Laurie. Good morning ladies and gentlemen. Thank you for joining our call this morning. I have many things to share with you regards to progress that Spectrum has enjoyed over the last quarter. Although many of you may have been following our development over the past several months, I would like to highlight some our accomplishments since our last call.

We continue to focus on our risk reducing (ph) strategy with diversification as an important aspect of our business at Spectrum. We now have seven propriety drugs in active development. This includes one in phase three and four in phase two clinical trials.

We have filed 11 ANDA's for generic drugs, including one we sat (ph) up for submission. Two have been approved. Nine are pending. In addition, we are working on several additional ANDA's with a goal of 15 to 20 approvals over next several years. We have continued to expand our senior management team and now have 29 full time equal (ph) employees.

All of our projects are making steady progress. We presented seven abstracts at the annual meeting of the American Association of Cancer Research on our project. And one paper was recently published in a (inaudible) journal. Spectrum has now been added to two healthcare indexes in past two months. One additional analyst has started coverage of Spectrum Pharmaceuticals that make total four total healthcare analyst that have started covering Spectrum Pharmaceuticals.

This last analyst has given a strong buy back recommendation and we are very pleased about it. And lastly and most importantly, Spectrum was named as one of the best companies to work for in Orange County. And I'm very proud of it.

We are pleased to see the progress made by our partner in moving Satraplatin phase three program forward. Seven hundred patients have been enrolled in this phase three clinical trial as of July 28, 2005. And plans to complete enrollment of 900 patients by the end of this year are on track.

We recently announced that a phase one study evaluating Satraplatin in combination with TAXOTERE in patients with solid tumors is now open for approval under GPC supervision. The initiation of additional exploratory studies using Satraplatin in combination therapies as well as for additional indications is another step towards realizing the full potential that this drug might have on the treatment of cancer.

Several additional studies are expected to begin before the end of first quarter of 2006. Our partnership, our strategic partnership with GPC enables us to advance the development of Satraplatin while also minimizing our expenses and preserving the upside associated with this promising drug for our company and our shareholders.

Basically I'm currently updating you on the great progress being made with Satraplatin, I thought it would be appropriate to update you on some highlights on upsides for financials, our financial insights for Spectrum. As you know Spectrum received $4 million in deferred payment at the beginning of the contract. And we will be entitled to an additional $18 million in payment upon reaching certain milestones on various regulatory filings and approvals.

Spectrum is also entitled to receiving certain royalties from worldwide sales of Satraplatin. Additionally, Spectrum has co-promotion rights in the United States under certain conditions. If Satraplatin's sublicensed to a third party, if Spectrum participates in up front payment and royalties. For those of you who would like to see the full text of this contract, the document can be found attached to our third quarter 10Q for 2004.

Both GPC and Spectrum are working very hard towards making this drug a success. And we are very pleased with the progress we have seen so far. On July 25 Spectrum launched its phase one two trial of Ozarelix formerly called SPI-153 following the approval of IND in the United States to explore the safety and application dose rate for patients with hormone dependent prostate cancer.

We are enthusiastic to advance the development of Ozarelix in the United States with the start of a clinical study that will provide us additional valuable information regarding the optimum dose range for testosterone suppression. This is an important outcome measure in the management of hormone dependent prostate cancer. Also during this quarter on June 14, Spectrum Pharmaceuticals received from FDA approval for Carboplatin ready to use injections ANDA.

And this is our first ANDA approval for injectable oncologic products. Carboplatin is a platinum based drug. One of the most widely used indicator drug used in the treatment of a variety of (inaudible). This approval marks our entry into the drug injectable market, most notably the anti-cancer segment where we are focusing significant new product development upwards.

We believe that a generic oncology products will be synergistic with our propriety development program and will enable us to promote the brand awareness of the Spectrum ahead of the entity of our propriety oncology products. Our marketing partners, Cura Pharmaceuticals, is currently on hospitals, clinics, large physician practices and specialty distributors who are currently customers of Cura's injectable product line.

We are actively in contact with Cura and we meet with them on a routine basis to be kept up to date with selling activities and strategies. To provide additional background on our partners, Cura is an approved vendor to the three largest wholesalers, McAtin, AmeriSource, Burgin, Cardinal.

The major hospital buying groups, Innovation, Consortia and others and the four largest oncology distributing companies including Oncology Supply, OTN, Florida Infusion and Met-Vac who supply the oncology practices, over 80% of oncology practices, they deliver to various groups.

All of the executive sales team has over 15 years of experience selling into the injectable market place, well positioning our injectable product business. This approval of our second ANDA is yet another company milestone towards our stated objective of having 15 to 20 generic drugs, including several additional generic oncology drugs. If approved by the FDA and put them on the market within the next five years.

This quarter Spectrum continues to bolster its management team by appointing industry veteran, Dr. Chuck Chukwumerije, as Vice President of Quality Assurance and Quality Control. Joining Spectrum from Purdue Pharma and Ortho-McNeil Pharmaceuticals, Chuck brings with him a feisty industry pharmacy and over 15 years of relevant experience in the pharmaceutical industry. Responsible for Spectrum's global quality operations, Chuck will provide leadership and direction in the maintenance of quality systems and procedures at Spectrum.

He'll be working with the company's domestic and international partners to insure good manufacturing practices at the plants around the world. He will also be responsible for overseeing compliance with quality control and other regulatory needs in various functions at the company. Lastly, on May 15 we added a new product, Lucanthrone to our diversified drug portfolio.

Lucanthrone is an older drug which is currently in phase two clinical trials as a radiation sensitizer in patients with brain tumors. Lucanthrone has the potential to improve the outcome of treatment for a number of human malignancies. This is particularly true with brain tumors because it readily crosses the blood brain barrier. Published studies have demonstrated that Lucanthrone could very well increase the effectiveness of radiation treatment by preventing forced radiation repair of DNA damage, leading to loss of cancer cells by (inaudible).

We are very excited to add this product to our growing portfolio of drug candidates that aids in the treatment of cancer or other unmet medical needs. Going to other events since our last call. We are very excited to have been included in the new Russell Microcap index effective June 24, 2005. This new index provides greater recognition for a small cap company like Spectrum, and offers a more significant benchmark of portfolio managers to invest in this company.

It also underscores the progress we have made in building a business from the ground up in just over two and a half years. In addition, Spectrum Pharmaceuticals was named as a founding member of the new NASDQ Healthcare Index on July 27, 2005. This new index will include companies in the pharmaceutical and healthcare fields. And we believe it will generate enthusiasm and recognition for Spectrum in the investor arena.

And last month Spectrum added another cell site analyst, First Albany Capital, to its coverage universe. First Albany initiated coverage on Spectrum Pharmaceuticals on July 19 with a strong buy rating. One final event near and dear to my heart is that Spectrum was listed as one of the best companies to work for in Orange County by the Orange County Metro Magazine.

This significant honor is so important because this reflects the attitude of our employees and Spectrum's gender work involvement. Our employees feel a passion and commitment for what we are trying to achieve and have spent every day trying to make a difference.

Overall we are very pleased with our accomplishments in the second quarter. Looking at the opportunity that lies ahead in our diversified and focused drug development program, combined with our strategic alliances and a strong cash position we are very encouraged that Spectrum will continue to leverage its expanded experiences and capabilities and continue to further a proven track record in oncology and other drug development.

With that, I'll turn it over to Shyam to discuss our financial highlights in more depth. Shyam.

Raj, thank you very much. Good morning everyone. I will provide a brief overview of the financial results for the second quarter of 2005. As highlighted in our earnings release this morning we reported a net loss of approximately 4.6 million, compared to a net loss of approximately 2.6 million in the same period last year.

The cumulative increase in net loss for the quarter was primarily due to increases in research and development expenses due to continued advancement of our product portfolio. We also recorded revenues this quarter of 240,000 from product sales. This was the result of the introduction of Carboplatin, ready to use injections.

The first shipment was made less than two weeks after its approval by the FDA, which occurred on June 14. This compares to revenues of 73,000 in the same quarter last year. The 73,000 last year related to licensing revenue. Research and development expenses increased approximately, sorry, increased to approximately 3.4 million in the second quarter of 2005 as compared to 1.3 million in the second quarter of 2004.

This is a direct result of the price in number and scope of product under development and the clinical trial activities. During the latest three months ended June 30, 2005 we had multiple phase two trials underway related to EOquin, Elsamitrucin and Ozarelix. During the same period in 2004 we had only one phase two trial related to EOquin.

Elsamitrucin had just started its clinical trial at that time. General and administrative expenses increased very slightly to 1.4 million during the second quarter. This increase was primarily applicable to an increase in professional fees including legal services. Consistent with our previous guidance that our cash expenditures in 2005 is expected to average approximately five million per quarter. At the end of the second quarter Spectrum had a cash and multiple securities balance of approximately 33 million.

This compares to approximately 38 million at the end of the first quarter of 2005, and approximately 39 million on hand at the end of 2004. With that, Raj, I would like to turn the call back to you.

Thank you Shyam. I would like to talk a little bit about our strategy for the rest of 2005, namely to further our goal of becoming a premier diversified specialty pharmaceutical company focused on oncology and other unmet medical needs.

Over the next six to nine months we intend to advance many of our clinical programs. The Satraplatin phase three trial will complete enrollment by year end. Enrolling ANDA submission is expected to occur in the second half of 2005. EOquin, our second leading drug will complete a phase two clinical report and with all relevant data we plan to meet with the FDA and discuss a strategy for a phase three trial that should begin next year.

Elsamitrucin will complete trial enrollment in a multi-sensor phase two trial by year end. With Ozarelix we will complete enrollment in the European prostate cancer trial. And will continue other two phase two trials, one in benign prostatic hypertrophy in Europe and the other in hormone dependent prostate cancer trial in the United States.

We plan to file an additional one to two more ANDA's before the end of 2005, which will bring the total number of ANDA's to five or six in 2005 exceeding our original goal of three to four in this year. As part of our strategy Spectrum remains committed to advancing a propriety portfolio by capitalizing on the generic opportunities.

Our generic opportunities just one part of our overall financing strategy. Minimal resources are required to develop our generic drug, but it's ability to accelerate revenue and cash flow and supplement our financial needs for Spectrum's proprietary development program could be considerable.

Eventually when 16 to 20 generic drugs have approved and on the market, we expect to generate significant cash flow to sustain our propriety drug development program. However, with only two drugs on the market and until we have a critical number of drugs approved, we expect our revenues from generic side of the business to be sporadic and unpredictable.

But let me remind you that our strategy is that whatever money we bring in from generic side of the business, it is the money for which we don't have to issue any equity. Looking further ahead, we intend to successfully bring several unique drugs through regulatory approval and market acceptance while attempting to diversify our business and our portfolio. Finally, I am happy to announce that we expect to offer more face to face meetings with our investors.

We are planning to be on the road more often than in the past in order to provide company updates to the investment community more frequently. Specifically we are hosting our second annual investors day on October 10 in New York City, and a follow up investors day on the west coast on October 11.

We plan to provide additional details on these meetings towards the end of summer as we move closer to those dates. With that, we will now be happy to take your questions. Operator?

Thank you sir.

[OPERATOR INSTRUCTIONS]

And we'll go first to Adam Greene with First Albany.

Thanks. Good morning everyone. You said in the past that you're going to have interim efficacy look by the end of the first quarter, I think it is. Can you tell us exactly what the safety monitoring board is going to be looking for? What you would need to show if the trials were to stop early?

And also on Elsamitrucin what data you'll be presenting at Ash (ph) in September if you know yet?

Let me ask Dr. Lenaz to answer this question.

(inaudible-heavy accent and low audio)

Adam, let me just add to what Dr. Lenaz said. That the interim analysis plans are on track. They will be conducted by the end of first quarter 2006. And keep in mind that this interim analysis is not a dirty quick and dirty look and is not being managed by either GPC or by anyone else.

We've got independent consultants who are working - it's a very complex process. Keep in mind the trial is running at 200 centers in multiple countries and the data has been coordinated. And the interim analysis go into progression is a complex end point. So when we complete interim analysis the idea is to make sure that every progression is verified and there are no questions about it.

So we have outside independent experts including the radiologist, oncologists, who are making sure that once they call progression the FDA will buy the progression. So this aspect of interim analysis is being taken very seriously. And our expectation is that this will be completed by the end of first quarter of 2006.

Great. Thank you.

[Operator Instructions]

And we'll go next to Hal Zoo (ph) with Rodman Renshaw.

Hi. Good morning guys. Congratulations for a good quarter. I have a question for the Satraplatin. Was wondering if you guys can give us additional details in terms of the options you guys have retained for the co-promotion or rights in the U.S. for Satraplatin?

Well, let me just say, the arrangement is as follows. That GPC has the worldwide rights to this drug, Europe, Asia and the United States. And we have co-promotion rights in the United States. And the further details about this co-promotion, how and what percentage, hasn't yet been worked out. We haven't made it public yet.

However, keep in mind that to Spectrum moving forward is a really upside on Satraplatin program. And at this time I am not at liberty to disclose any of the details.

OK. Fair enough. Now on EOquin, you guys have plans to meeting FDA for the potential phase three. I was also wondering if you guys can shed a few lights on the potential design and also as well as the size of the phase three either in New York or in Europe. Thanks.

Thank you Hal. Well let me just say the following, that it will be inappropriate for us to comment upon the design that the FDA may accept or may not accept. You know this process of meeting with the FDA is always one of negotiations. We have a group of experts who are working with us. We have a task force in the company. We have several investigators and park leaders from Europe, principle investigator.

And several opinion leaders and people who have served on the advisor committees and are leaders in this field. So those folks are advising us as to what should be the protocol and what should be our going into position. So this time would be inappropriate because no matter what we tell you, FDA might want to tweak it, change it or what have you.

So I think you will just have to wait for the 3 or 5 months before we make it public as to what the design will be.

Sure. Is the (inaudible) maybe in the process of maybe obtaining SPA negotiation with the FDA for this potential phase three?

Let me assure you that we will do everything within our power to expedite the development of EOquin as much as possible. And we know that special protocol assessment is a tremendous tool that is now available to drug industry. But it still depends on the FDA and their advisory panel whether they grant it or not.

OK. Good. Now move on to the Ozarelix. I know you guys have a two phase two HDPC and one BPH. Can I ask you guys for the timelines in terms of potential interim data or the data for Ozarelix in these two trials? You know, when we might expect data from these either trials.

Let me have Dr. Lenaz answer that question.

(inaudible-heavy accent and low audio)

OK.

Let me just add that, you know, with Ozarelix we now have three trials. One in hormone dependent prostate cancer in Europe and one similar trial with different dosing regiments in the United States, and the third trial is in benign prostatic hypertrophy. The enrollment in hormone dependent prostate cancer trial in Europe is expected to be completed by the year end.

And as you have said, we are likely to have that data available soon thereafter. The BPH trials take longer. And, again, the U.S. hormone process trial started very late. Only second half - only last couple of months. So that data will not be available until middle of next year if any.

OK. And I have a last question regarding the generics. Have you guys - can you guys give us any guidance regarding the potential future generic sales for the second half of this year?

Well, again, as I said in my preamble it's too early to give any guidance on the generic sales. And you know generic drugs are best sold when you can bundle them. Right now we have only two drugs approved. One is a tablet and the other is an oncologic injection.

And I would wait to give guidance once we have about 10 drugs approved and on the market. It would be very premature. As I said, until we have one or two drugs approved and on the market our revenues are going to be sporadic.

OK. I apologize. I do have one last question. Have you got any presentation of standards at the upcoming conference? You guys have already managed ASCO (ph) for the HDPC for Ozarelix. Any other potential presentation of data for any other trials ongoing?

Yes. We are planning to present interim data on Elsamitrucin at ASCO (ph).

OK.

Anything else?

Also looking at the possibility of presenting some data at the NCI AACI UAPC meeting which we look for middle of November in (inaudible). That's a meeting where there is also available data on new drugs are presented. We are awaiting the possibility of presenting some data there.

Great. Thanks.

[Operator Instructions]

And there are no further questions at this time. Dr. Shrotriya, I'll turn things back over to you for additional and concluding remarks.

Thank you for all your questions. In conclusion let me say that we at Spectrum are focused on building a strong and sustainable business that we believe will drive long-term shareholder value. We have a diversified and focused drug development program with one drug in phase three and four drugs in phase two clinical trials.

And three drugs in preclinical that are likely to move into clinical trials within the next 12 to 15 months. We have multiple ANDA's under review at the FDA and some (inaudible) more that are under development. One of the ANDA's under development is sumatriptan injections which has been filed with paragraph four certification. (inaudible) challenge the 180 day exclusivity could mean significant upside for Spectrum and bring to our bottom line in tens of millions of dollars.

We have a team of experienced dedicated personnel with a proven track record of success in developing drugs, filing new drug applications and commercializing them. We have strategic alliances that leverage capabilities and expand experiences. Please remember that Spectrum has been in existence as an oncology focused company for less than three years.

All of this has been achieved in such a short time due to the passion and commitment of our employees and support from our board and you, the shareholders. And we are grateful to you for that support. We look forward to seeing you at our investors day and speaking to you throughout the third quarter. Thank you very much.

And once again, that does conclude today's conference. I would like to thank everyone for joining us today.