Spectrum Pharmaceuticals Inc (SPPI) 2005 Q4 法說會逐字稿

Good morning, my name is Tracy and I will be your conference operator. At this time I would like to welcome everyone to the Spectrum Pharmaceuticals Earnings Release Conference Call. [OPERATOR INSTRUCTIONS] Mr. Pedranti, you may begin your conference.

Thank you, good morning and welcome to our first conference call of the year. I am William Pedranti, Vice President and General Counsel. With me today 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 today's call I would 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 involve risks and uncertainties that could cause actual results to differ materially. These risks are described in further detail in the company's 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, 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 would disseminate the updates to the investing public. Our annual report on Form 10-K was filed today with the SEC and we issued our earnings press release earlier this morning. For the 10-K earnings press release or the corresponding 8-K and for additional information including other SEC filings, please visit our website at www.spectrumpharm.com.

Now I would like to turn the call over to Dr. Raj Shrotriya. Raj?

Thank you, Will. Good morning ladies and gentlemen. Thank you for joining our call today. We have three objectives for today's conference call. First I'll present operational highlights and talk about the progress our team has made over the past year. Second, Shyam Kumaria will review Spectrum's financial results and third I'll present our goals for 2006 and beyond.

I would like to begin by outlining our business strategy first. Our mission is to bring our core expertise and passion for excellence to acquire, develop, and commercialize pharmaceuticals for oncology and unmet medical needs while building value for our shareholders. The tenets of our business strategy to fulfill this mission are basically four. One, we have a diversified and broad product portfolio. We believe that a broad, diversified product portfolio increases the probability of ultimate commercial success. Accordingly, while we continue to advance our existing product portfolio we are also evaluating additional promising proprietary drugs for acquisition on in-licensing from third parties.

Second, our eyes are always focused on near-term revenues recognizing that new drug development is a lengthy process. We focus primarily on late-stage proprietary compounds with the potential for generating revenues in the near-term. Third, strategic alliances is a very important aspect of our business strategy. To mitigate any risks that may be associated with expensive and lengthy process of drug development and to accelerate the timelines we sometimes seek alliances especially in countries outside the United States. In exchange we get upfront fees, milestone payments, royalties and other commercial license privileges. And fourth and the last is product commercialization. As our drugs progress through development to the point of potential FDA approval for marketing in the United States we plan to expand our sales and marketing capabilities.

However, the costs of establishing and maintaining a sales force to effectively market proprietary drug products in the United States are quite significant. Accordingly, to accelerate the market penetration of our proprietary drugs when approved by the FDA we may seek collaborations with entities of proven sales, marketing, and distribution capabilities in the United States at least until we have a critical number of drugs to make it cost effective.

Due to the competitive environment of the generic markets, we have determined that sales can be maximized by making a strategic alliance with companies with established generic distribution capabilities. In a pursuit of the foregoing business strategy, during 2005 we in-licensed rights to three new proprietary drugs, they being RenaZorb for chronic kidney disease, SPI-1620 as an adjuvant for chemotherapy, and Lucanthone for brain tumor in Phase II trials.

We are actively evaluating additional promising later-stage proprietary compounds with the potential for near-term revenue. In addition we filed five new ANDAs or Abbreviated New Drug Applications for generic drugs in 2005. Although we have a strategy alliance for all of our generic drugs with Par pharmaceuticals we expect to continue to file additional ANDAs in 2006 that have been in development at the time of our signing alliance. We expect ultimate approval of these drugs by the FDA. Our shareholders will benefit from the profit sharing we have established with Par as our drugs are FDA approved and marketed in the United States.

Next, I would like to provide you with some operational highlights for 2005. As of today, we have eight proprietary drugs under development including one in Phase III, one about to enter Phase III, and three drugs in multiple Phase II trials. In addition we have three ANDAs for generic drug products already approved by the FDA and 10 other applications are under review by the FDA including one with Paragraph IV certification wherein we may have exclusivity for a certain period of time.

Spectrum has continued to make significant achievements in this corporate objective. Three highlights include progress with our lead drugs, Satraplatin and EOquin and I believe a strategic alliance with Par has been a very important accomplishment this year, whereby our generic drug strategy has been brought to successful closure while keeping upside for our shareholders.

Let me say a few words on Satraplatin, EOquin and other drugs. Satraplatin, which is an orally bioavailable platinum compound in development with our partner GPC Biotech has completed enrollment in a Phase III trial, a rolling NDA filing with the FDA has begun, and the NDA filing is on target to be completed by the end of this year.

Interim analysis results of the Phase III trials in hormone-refractory prostate cancer are expected to be announced by the end of next month. Satraplatin has been granted fast track designation by the FDA. Therefore, if the FDA approves the NDA the sales of Satraplatin could commence in the United States as early as late 2007 or soon thereafter. Pharmion Corporation is sub-licensee for the European and [some] other countries expects to submit for Europe in the marketing authorization in the first quarter of 2007 pending concurrence with the EMEA, the equivalent of the FDA.

Satraplatin offers a great opportunity for Spectrum and its partners. Worldwide sales of these class of drugs exceed $2 billion currently. A successful worldwide launch of Satraplatin, an achievement of all regulatory and sales milestones, could generate revenues in excess of $50 million for us net of our milestone payment obligations to the original partner, patent holder. In addition, we will receive a royalty stream on worldwide sales of Satraplatin, and also we have co-promotion rights for Satraplatin in the United States under certain conditions. This will enable us to build an oncology sales force when appropriate.

In February 2006, we partnered with Par Pharmaceuticals to distribute our generic products including sumatriptan succinate injections, the generic form of GlaxoSmithKline's Imitrex injections, for which we have filed an ANDA Paragraph IV certification. Not counting our share of the profit from Par's sales of our generic drugs, we could receive an aggregate of over $10 million under the agreement. We believe that this alliance completes our generic commercialization strategy, provides an excellent marketing partner for our generic products, and puts us in the best position to maximize the revenue potential from our generic drug portfolio.

This week, we filed an IND after our pre-IND and end of Phase II meeting with the FDA for initiating a pilot study to be followed by a randomized Phase III trial in the United States to evaluate EOquin in superficial bladder cancer. With Ozarelix, we completed enrollment in two Phase II clinical trials, one in benign prostate hypertrophy or BPH and the other in hormone-dependent prostate cancer. Enrollment in both of these studies was completed about four months ahead of schedule.

I would now like to turn the call over to Shyam to discuss the financial highlights for 2005 operations. Shyam, please.

Thank you, Raj. Good morning, everyone. I would like to provide a brief overview of the financial results for the year ended December 2005. As highlighted in our earnings release this morning, we reported a net loss of approximately 18.6 million or 1.06 per share for 2005. That compares to a net loss of approximately 12.3 million or $0.98 per share in 2004.

The increase of approximately 6.3 million in the net loss reflects the continued advancement of the company's product portfolio and was primarily due to increases in R&D expense and increased legal expense in connection with the GlaxoSmithKline lawsuit regarding our patent challenge of Imitrex. Revenues in 2005 were 577,000, compared to 258,000 in 2004. These revenues were derived primarily from sales of generic products.

R&D expenses increased by approximately 5.6 million from 7 million in 2004 to approximately 12.6 million in 2005. This is primarily due to the increasing scope of our drug development activities. In 2004, the principal clinical study costs related to a Phase II trial on one drug, EOquin. In 2005, we incurred costs related to multiple Phase II clinical trials on EOquin, Elsamitrucin and Ozarelix, and also costs in advancing the development of SPI-205 and newly acquired compound RenaZorb, SPI-1620 and Lucanthone.

General and administrative expenses increased by approximately 1.4 million from 5.1 million in 2004 to approximately 6.5 million in 2005. This was primarily due to an increase in legal expense in connection with the Imitrex litigation patent challenge. Stock-based charges in 2005 were just over $1 million compared to approximately 885,000 in 2004. These charges represent the value of stock issued in connection with the in-licensing of drug products and also the amortization of stock-based deferred compensation.

Commencing in 2006, such non-cash charges will become considerably larger as we adopt the provisions of FASB Statement No. 123(R). For perspective, had we adopted statement 123(R) in 2005 our reported loss for 2005 would have been approximately 4.4 million higher or approximately 23 million. We, however, believe the use of stock options and similar equity-based awards is crucial for an early-stage company like ours. This is necessary to retain and motivate high-performance employees and consultants, foster an alignment of employee and consultant interest with those of our stockholders, last but not least, as a means to conserve cash which is crucial for a company in the drug development business. At the end of 2005, we had cash and marketable securities of approximately 64 million. That's a brief background on 2005.

With that, I would like to turn the call back to Dr. Shrotriya. Raj?

Thank you, Shyam. One of the questions that we're always asked by our investors is as to what should they be expecting during the next six, 12, and 18 months. So let me share with you our goal for next 18 months or so. I believe that this period of remaining 2006 and 2007 is going to be an important transforming year in our company's history. It was just over three years ago that our company faced bankruptcy, a NASDAQ delisting, a stagnant pipeline and was down to only a handful of employees.

As we enter 2006 we are very excited about beginning the transformation of our company from purely a drug development company to a drug development and commercialization company. Let me share with you about how we are going to build upon the accomplishments of 2005 and begin this exciting journey of transformation. Key accomplishments to watch for in the near term are for Satraplatin, which is a lead compound. Completion of full NDA filing, which remains on target and is expected before the end of this year. If successful, this drug could be on the market as early as 2007 and/or soon thereafter. Interim analysis by the independent data safety monitoring board is expected to be available before the end of next month.

Other ongoing Phase II trials evaluating Satraplatin are being conducted for metastatic brain cancer, non-small cell lung cancer and advanced solid tumor. Several new clinical trials are planned for initiation this year. Due to the fast track designation for Satraplatin, we may receive approval as early as late 2007, and thereafter could begin receiving milestone and royalty payments. If GPC Biotech and [we] co-promote Satraplatin in the United States, we believe this opportunity to build our own sales force could be realized sooner rather than later.

For EOquin which is one of the highest priority projects in the company, we plan to initiate a Phase III trial in 2006 in the United States to evaluate EOquin in superficial bladder cancer after completing a small 20-patient pilot study, and we also plan to file for a Special Protocol Assessment or SPA, before we initiate the randomized Phase III trial. We also plan to initiate a Phase III study in Europe this year and the plans are also in the works to meet with the EU authorities in this regard.

For Ozarelix, our third most advanced drug, we expect results from two clinical trials the benign prostatic hypertrophy and hormone-dependent prostate cancer trial. Both of the trials, Phase II trials have completed accrual in late 2005 and we expect the results to come some time before the end of this year. Based on those results, we will determine the next regulatory and [clinical] steps.

Also, we plan to initiate a study in healthy female volunteers for endometriosis in Europe in the second half of 2006, and we are currently negotiating our protocols and contracts with the investigators.

For Elsamitrucin a multi-center Phase II clinical trial in refractory non-Hodgkin's lymphoma and chronic lymphatic leukemia especially in the [toxin] failures is running at approximately 30 centers in the United States. During this year we also expect to initiate a Phase II study in solid tumors like head and neck cancer and some other combination studies.

For other proprietary drugs candidates, we plan to continue to fund the development including clinical trials of Lucanthone in Phase II clinical trials and have three clinical drug candidates, RenaZorb, SPI-1620 and SPI-205. On the generics side, we currently have three generic drugs approved by the FDA, ciprofloxacin tablets, fluconazole tablets and carboplatin injection.

We currently have some 10 ANDAs under review at the FDA, including one with Paragraph IV certification for sumatriptan injection. The patent litigation with GlaxoSmithKline for sumatriptan injection is set to go to trial in November of 2006. We're excited about this opportunity and optimistic about our chances for success, particularly now with Par's financial and legal assistance in the litigation. We expect that going forward we will receive FDA approvals for several of our ANDAs during 2006, for Par to market and plan to file additional ANDAS for injectable drugs that are currently under development.

We believe, that our agreement with Par puts us in the best position to maximize the revenue potential from the generic drug portfolio. We believe that other key events will set the stage for the transformation of our company. In a press release and SEC filings, we discussed in detail the proprietary products we are developing. I will be happy to respond to questions and elaborate on the development status of any of our products.

However, before we move to the Q&A let me reiterate for you that our proprietary oncology drugs are the main primary focus of our company and represents the fundamental basis for investing in Spectrum over the long haul. In summary, let me say that Spectrum is embarking on an exciting year. In a short period of little over three years, we have built a diversified oncology company with multiple later-stage drugs. We are taking advantage of our strategic alliances both in India and in the United States to seek marketing rights for niche products. We're excited about our accomplishments in 2005.

We have a strong cash position to support the future growth of the company. We are proud to have added several new members to the Spectrum team to further bolster the solid team that we already had in place. Today our employees count at about 40 or 41.

In 2006 and beyond, we intend to successfully bring several drugs to regulatory approval and market acceptance, while we continue to diversify our portfolio and prepare ourselves for commercializing our products. In short, we have great confidence that we are on the right path to long-term success.

With that, we'll now be happy to take your questions. Operator? Tracy?

[OPERATOR INSTRUCTIONS] Your first question comes from the line of Ren Benjamin.

Hi good morning, and congratulations on your ongoing progress. Can you talk to us a little bit about the EOquin program? You know this is a program that I think many kind of felt was just unfortunately, maybe felt incorrectly, but it was stuck in Phase II. We know that you were having talks with the FDA. It seems like things are moving forward. Can you talk to us a little bit about the history of the talks with the FDA? What was going on there, and what's the need for a pilot study before initiating the Phase III, since several Phase II trials have already been completed or ongoing?

Ren, thank you for your question. That's a very important question. I'm glad you asked. Let me try to set a stage for EOquin. EOquin is a drug that's indicated for the treatment of superficial bladder cancer. Let me remind people that, although there are only 63,000 new patients a year, there are almost 0.5 million, about 499,000 patients in this country today with superficial bladder cancer. And it's amazing that in the last 20 plus years, not a single new drug has been introduced into the marketplace. In fact, there was a recent study that I am now using in my presentations that shows, that whereas prostate cancer was just as neglected as today bladder cancer is before the PSA became a test and all the people started getting tested.

Today the cost of treating a patient's prostate cancer is higher--is lower than for the treatment of bladder cancer. Bladder cancer is the fifth most expensive cancer to treat. And yet hardly any developments had taken place. So, keep in mind that all the development of EOquin until this date has taken place in Europe. The drug was discovered at the university in the Netherlands. The Phase I and Phase II trials were done in Europe. In fact, about 100--before Spectrum acquired the rights to this drug, 143 patients were treated in Phase I and Phase II trials in Europe. So the entire drug experience was in Europe.

So, when we decided to start trials in the United States -- clearly this was an area where FDA accepts the data in foreign country, however, whenever there's a need to move into a rapid Phase III program FDA [is] careful. And one of the things we had to do during the last year was, that we had to do several additional toxicology studies to satisfy the FDA. Although we had human data, in spite of that we had to do several additional toxicology studies before we could have a meeting with the FDA.

So, we wanted to make sure that we dot all the i's and cross all the t's before we go and meet with the FDA. EOquin is a very important drug for us, and we did not want to take any chances of going half-cocked, with a half-cocked gun. So we wanted to make sure that we have the best works -- best experts working with us. We wanted to make sure that we have all the toxicology data that the FDA is likely to ask us for. And therefore, when we had a pre-IND and end of Phase II meeting with the FDA on January 19th, the meeting went very smoothly.

In fact, one of the questions that the FDA said that the phase--before you start a Phase III program how about doing about a small pilot study in about 20 patients, where you administered EOquin immediately after TUR. Keep in mind that the--that the way bladder cancer is treated in the United States is somewhat different than the patients are treated in Europe. In fact in Europe, the treatment is vastly different. They--they're more used to using drugs. In the United States the first treatment is surgery. And therefore what the FDA requested us was, which I think is a fair request, that they wanted to make sure that the urologists and physicians were used to treating these patients of superficial bladder cancer with TUR or transurethral resection, would be able to give EOquin just as it has been given in the past.

And for us it is very important, because we will be preparing the sites who do these pilot studies they'll be ready then to move into Phase III trials quickly. So we would go through the extensive process of IRBs and getting the investigators ready with protocol. So I think this--the perception that there has been somewhat a delay is not correct. Because in order to set up a Phase III program it takes a good one to two years of preparation.

So during the past year, year and a half, we have been extremely busy with EOquin. EOquin has been the highest priority project in the company and will remain so over the next several years until the NDA is filed. So the need for a pilot study is primarily to gain the experience in the United States in the hands of the U.S. investigators in using EOquin the way it will be used in a Phase III randomized trial.

Okay, so just so I summarize you correctly. The pilot study will essentially be mirroring what the Phase III trial will look like.

Absolutely. That's our hope.

Okay. Another question is, I remember because enrollment for the Ozarelix studies in both BPH and hormone-dependent prostate cancer went quite rapidly, that it was my understanding that we might see results by the middle of this year, potentially some time around the ASCO timeframe, although not precisely at--at ASCO, but around that timeframe. But during today's conference call, you mentioned at the end of this year. Is there--was I incorrect or is that--is the interim results still slated for the middle of this year and final results for the end? Can you just explain that?

Yes, Ren, you have to understand that in our company we have tried to be conservative in our statements, we want to over--we don't want to over-promise. We want to under-promise and over-deliver. The plan is to have the hormone-dependent prostate cancer trial results by the middle of the year. You're absolutely right. Keep in mind -- and however the results of the BPH trial would be more likely in third quarter. And the reason for that is, that although the enrollment was completed in last year, in December, the patients have to be then, once you stop the enrollment, patients that have entered have to remain on the treatment for almost six months. And then you collect the data and analyze it. So we have not missed a heart beat in both of these trials. Both trials remain on track and the results will be available some time between June and November.

Terrific, terrific. And can you just remind us what are the endpoints in both these trials? What we're looking for?

Well let me request Dr. Lenaz. Maybe Dr. Lenaz can quickly give you the endpoints in both of these trials. Our Chief Scientific Officer is also on line. Dr. Lenaz?

Hi you wanted to know about the endpoints in the Ozarelix trials, right? The endpoint in the prostate cancer trial, the main endpoint is testosterone suppression, and secondary endpoint is safety and tumor response and pharmacokinetics as well. In the BPH trial, the endpoints include hormonal effects, but mainly symptomatic relief with utilizing both of the--standardized the scoring system for the prostate--for benign prostatic hypertrophy and urine flow and prostate volume.

Terrific, so great. Thank you for answering my questions and best of luck with Satraplatin this year.

Ren, let me just add to what Dr. Lenaz had said that-- the BPH trial is a very, very interesting trial. It was a 144 patient trial. It's a randomized placebo-controlled trial. And the BPH market is over $4 billion a year market. And currently there are only two kinds of drugs marketed, primarily alpha blockers and alpha reductase inhibitors. Alpha blockers have only symptomatic relief. So, once the patient stops taking the dose or the method dose then the symptoms are back. And the symptoms of BPH can be very troubling. Patients don't have a stream flow of urine and they have to constantly go to the bathroom and they have a lot of discomfort and pain. So it's a very real problem.

We believe that with drugs like Ozarelix, which have a direct effect on the prostate cells, by shrinking the prostate we could be--and by giving one injection we could be offering them relief for six months. So we are very excited about the role that Ozarelix can play in managing patients with BPH. And we are very excited, and we are looking forward to the data coming out some time in the third quarter.

Thank you, very much.

Your next question comes from the line of Adam Greene.

Thanks. Good morning, everyone. I was wondering if you could fill us in on Elsamitrucin when you expect the Phase II to finish up, and when we could expect to see data there? And also, can you walk us through the potential cash payments or milestones that you could possibly recognize in 2006 and 2007?

Adam, thank you for your question. I'm glad you're on line. And just to give you an idea, let me start by cash payment, cash payment. I think what you meant was [milestones] we might be expecting to get into Spectrum Pharmaceuticals from our partner GPC Biotech.

Right.

So let me just try to say that milestones we are expecting to get about $18 million of milestones from GPC Biotech, and additional milestones from the alliance with Pharmion for European rights in Europe. From Pharmion we will get additional milestones, regulatory and on some sales milestones. Obviously sales milestones will not come until we have sales.

But the regulatory milestones have different categories. For example, the first milestone we will get from GPC Biotech will be on acceptance of the NDA by the FDA. And we expect that milestone to come some time by the end of this year. When the NDA is filed the FDA usually takes 30 days or so. After that, we will be eligible to receive the milestone.

The second milestone would be on approval of the NDA, and we hope that will happen in 2007. Same way we expect the filing of our NDA submission in Europe some time in first quarter of 2007 by Pharmion, and we should--that should also trigger one of the milestone payments to us. Subsequent milestone will be on EMEA or European approval that also could happen in 2007. So I would say about--we expect about four milestone payments from GPC, Pharmion, Alliance, Satraplatin-related sometime in--end of 2006 or all in 2007 and they'll be on filings and approvals of Satraplatin.

Okay.

Additional milestones and royalties, of course, will come sometime in 2008 once we start having sales and royalties.

Okay.

Let me talk about Elsamitrucin. The Phase II trial is almost at the end of completion. What we decided, we had a meeting of our experts in September of last year, and at that time it was decided that there's a category of lymphoma that's very hard to treat, what is called mantle cell lymphoma. And in fact, on the interim look of the data it was seen that Elsamitrucin seems to have effect on mantle cell lymphoma better than they have ever seen before. And therefore the idea was, let's go and capture more on initial patients of the sub-type of non-Hodgkin's lymphoma called mantle cell lymphoma. And therefore, all the sites have been directed to collect as many patients of mantle cell lymphoma as possible. And therefore the--that attempt is going on at this time. And I'm hoping before the end of this year, we would have better idea about the patient population that is best suited for a randomized trial with Elsamitrucin.

Okay great. Thank you.

Adam, thank you.

[OPERATOR INSTRUCTIONS]

Your next question comes from the line of Tony Campbell.

Good morning, Raj. I'm a little confused. So, let's take Satraplatin. If everything goes well both in the States and in Europe, what are the total amount of royalties that you could collect before the--up to approval? Up to and including approval. And then, I think you threw out a $50 million revenue number. I'd like to understand how you got to that number.

Tony, good morning. Thank you for your question. Let me try to explain it. We get two different kinds of payments into the company and one is the milestone. And milestone payments we get on achieving certain milestones. And we expect to get $18 million on filings and approvals. The 50 million number --

For U.S. or for U.S. and EU?

For U.S. and Europe primarily for those two countries.

Okay.

And we have a small payment in this $18 million for Japanese as well, so I would say most of the--the majority of the number comes from the U.S. and Europe. So we should get about $18 million from the GPC in 2007 I would say, between 2006 and 2007. The Pharmion deal gives additional milestones to us, that is in addition to--and we have not broken down the--we have not publicly announced as to what is the breakdown of those milestones.

I don't care about the breakdown. I'm trying to get a sense of how much cash could potentially come into the company. So what would be the--if everything went well with regard to Pharmion, what would that mean in terms of royalties or of payments, excuse me?

Well Pharmion payments are tied in three different ways. One is the milestones, regulatory milestones, sales milestones and royalty payments that will trickle to us through GPC. We have--so let me just start from the back end. We get, Spectrum gets royalty payments on worldwide sales of Satraplatin. It doesn't matter who sells them, GPC or one of the sub-licensee it doesn't matter. So that remains intact. The second aspect is that we get some milestones that come to us from GPC Biotech. In addition, we get some additional milestones that GPC is supposed to get from the sub-licensee. A portion of that comes into Spectrum. So, the $18 million milestones become bigger because there's a Pharmion sub-licensee. In other words --

All right, but so how much bigger? I mean I'm trying to get a sense of how much cash--

Well we have not publicly disclosed that, and I'll have to check with my attorney as to what we can disclose. We need to discuss this with our partners as well.

Well then how did you get to the $50 million revenue number then?

Of the 50 million, maybe our CFO can talk about that. Shyam, do you want to comment on this 50 million number that you had put in? Shyam?

Yes, this is Shyam. The 50 million number represents a net of sales and regulatory milestones that we would expect from the GPC, GPC/Pharmion sub-licensing arrangement.

Okay, I think the question that Tony is asking about is the time relationship. I think his focus as I understand, Tony correct me if I'm wrong, is what to expect when. In other words, in short term in 2007 what can we expect, that's his question.

Well, and once you get the product on the market what percentage of it--I mean we can track the sales, but I'd like to know what percentage we get or even a range.

Well we will get--we have said, publicly said, we get double-digit royalties of worldwide sales. That's one. In addition, we get some other milestones based on achieving certain sales targets.

Are those high double-digit or low double-digit?

Low double-digit royalties.

Well then why, I think you made a comment about adding an oncology sales force or I guess I'm a little confused there too.

Well, let me just say the following, try to explain it. Currently we have no sales force, and we have two drugs Satraplatin and EOquin making rapid advances towards being available on the market in the next few years timeframe. So obviously for any company to be successful, we believe that they must have sales and revenue and profits. So we are always thinking on those terms.

We are not ready to build a sales force of ours, and in fact I made it very clear that if we have just one drug it might not be cost effective to have our own sales force. But if we had more than one drug, then maybe it will be cost effective. Until we can find a cost-effective formula, we are very open to making partnerships and alliances where companies have established sales force, and so that we don't have to run around and set up a sales force while we can take advantage of some strategic alliances.

So the point I made was, that since we have--these three years we have built Spectrum with a solid foundation of future growth. But we want to be a $1 billion market cap company over the next five, six years timeframe. And therefore, I'm always thinking of having our own sales force, our own profits, in some time in the future. We're not ready today. We may not be ready even in 2007. It will depend upon what kind of arrangements we make with our partners and new alliances that we have made, and we are considering right now to make some initial alliances. But we're not going to go and embark--we know the cost of building a sales force.

We will not do this unless we determine--I've done this part in past twice, at MGI PHARMA and SUPERGEN. And of course at Bristol-Myers I was primarily involved only in drug research. But I've always had a keen eye on having a sales force. Thank God in oncology you don't need a 1,000 people sales force. You can build a $1 billion business just by having a few 100 people in sales force. You can start with 20, 80, 100, 200 people sales force, and still do very successful launches of oncology products. So we are very familiar with it. Our hands are on the pulse of the market. We are always thinking of markets, but we are not ready to build a sales force today.

That's fine. Okay well that's then fine. Have a good day.

And Tony, thank you very much, Tony, and have a nice day.

At this time you have no further questions gentlemen.

Well, then let me take this time to thank all the listeners, all of our shareholders for all your questions. And let me say that Spectrum is embarking on a very, very exciting year, and I want to take this time to thank you for taking your time from your busy schedule to listen to a conference call. And I also want to take this opportunity to thank our dedicated employees who really make things happen in the company, and the dedication is absolutely unbelievable, and members of our Board of Directors for their vision, hard work and support to our company.

Over the entire year, we plan to be communicating with you either through press releases or our periodic conference calls. And with this, I would like to say thank you and have a nice day.

Thank you. And that concludes today's conference call. You may now disconnect.

Thank you, Tracy.

Thank you, sir.