Spectrum Pharmaceuticals Inc (SPPI) 2009 Q1 法說會逐字稿

Thank you everyone for joining us for the first quarter 2009 Spectrum Pharmaceuticals, Inc. earnings conference call. My name is Erica and I will be your coordinator for today. (Operator Instructions). At this time, I would like to turn the call over to Mr. Paul Arndt, Senior Manager of Investor Relations, you may proceed.

Thank you, Erica. Good morning and welcome to Spectrum Pharmaceuticals' first quarter 2009 corporate update conference call. I am Paul Arndt, Senior Manager of Investor Relations for Spectrum Pharmaceuticals. Let me giver you the agenda for today's call. First, our Vice President of Finance, Shayam Kumaria, is going to give us an overview of our first quarter financial highlights. Second, our Chief Executive Officer, Dr. Rajesh Shrotriya will go over the first quarter events and achievements. Third, Dr. Andrew Sandler, our Chief Medical Officer, will briefly speak on ZEVALIN. Fourth, we will open up the call to questions, and then Dr. Shrotriya will offer up some file comments and wrap up.

Before I hand the call over to Shayam, I would like to remind everyone that during this call, we will be making forward-looking statements regarding future events of Spectrum Pharmaceuticals, including statements about the products' sales, profits and losses and the safety efficacy, development time lines and clinical result of our drug products 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, Monday, May 18th, 2009, 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 our 10-K, 10-Q, press release, corresponding 8-K and additional information including other SEC filings, please visit our corporate website at www.spectrapharm.com.

I would now like to hand the call over to Shayam.

Paul, thank you very much. Good morning to everyone on the call. Consolidated revenues of approximately $14.1 million was comprised of approximately $9.4 million in Fusilev net sales, approximately $2.6 million in ZEVALIN net sales, and approximately $2.1 million attributable to the amortization of $41.5 million up front payment received from Allergan in October 2008. This compares to no revenue in the same period of 2008.

The Company recorded net income of approximately $624,000 or $0.02 per share compared to approximately $8.7 million or $0.28 loss per share in the corresponding period last year. Research and development expenses were approximately $5.7 million, as compared to approximately $6.4 million in the same period last year, an approximate $700,000 or approximately 11% decrease. This was mainly due to the sharing in the costs associated with the development of Apaziquone by our developing partner, Allergan.

Selling general and administrative expenses were approximately $6.4 million for the quarter, an approximate $3.8 million increase compared to the $2.6 million of R&D expense in the same period in 2008. The increase is attributable to the commercialization of ZEVALIN and Fusilev.

As of March 31, 2009, the Company had cash, cash equivalents and marketable securities on hand of approximately $64 million. This compares to approximately $48.6 million at the end of March 31, 2008. During the first quarter ended March 31, 2009, net cash provided by operations was approximately $300,000 compared to net cash used in operations of approximately $7.1 million in the first quarter of 2008. This decrease in cash utilization is primarily attributable to revenues derived from sales of Fusilev and contribution to research and development expenses by Allergan.

As of March 31, 2009, there were approximately 32.5 million shares issued and outstanding compared to approximately 31.5 million shares issued and outstanding as of March 31, 2008. It shall be noted that in the past 12 months, approximately 7.5 million stock options and warrants or approximately 23% of issued and outstanding shares have now been retired.

I will now hand the call over to Dr. Shrotriya.

Thank you, Shayam. Good morning and thank you for joining us on this call today. In the past six months, we have made the transition from a small research and development Company to a well diversified commercial organization generating sells and revenue from two marketed cancer drugs. First, after obtaining FDA approval, we launched Fusilev in August 2008. Second, later in year, we acquired the rights to ZEVALIN, a novel FDA approved and marketed drug for Non-Hodgkin's Lymphoma. Please note while Fusilev is a small molecule, ZEVALIN is a biological drug, making ours a diversified portfolio. Third we built our own highly specialized oncology sales and marketing team to insure the commercial success of these drugs. More importantly, for the development and commercialization of our latest stage bladder cancer drug, we signed a highly profitable alliance with Allergen. This alliance was signed at a time when the expenses for two large trials involved more than 1200 patients at 120 plus centers in the United States, Canada and Europe would have made it a very expensive endeavor for Spectrum, especially at that time when general economic conditions had deteriorated and our share price had gone below $2.

Building on our accomplishments last year, I am pleased to say that 2009 is shaping to be a transformative year for Spectrum Pharmaceuticals. Today, we are in a very strong position to bring novel drugs to cancer patients and value to our shareholders. Today we have two marketed cancer drugs bringing sales and revenue, a lead pipeline drug in final stage of development with substantial financial support from a strong partner. In addition, we have built a strong team of experienced and committed professionals, which is fully in place. With the strong cash position that enables us to execute on our strategy, we continue to differentiate ourselves favorably from our peers in this financially challenging times. We at Spectrum Pharmaceuticals have been very excited about the commercial opportunity for ZEVALIN. We are confident that this strategic and tactical initiatives that we have already implemented will enable us to extract ZEVALIN's full commercial potential in a timely and cost efficient manner.

At this time, I would like Dr. Andrew Sandler, a Chief Medical Officer to comment on ZEVALIN. Andy?

Thank you, Raj. Good morning, everyone. ZEVALIN is a safe and effective drug for treating B cell Non-Hodgkin's lymphoma. ZEVALIN combines the tumor targeting ability of an antiCD 20 monoclinal antibody, and the tumor destroying power of localized atrium 90 radiation. The radio levels antibodies can specifically bind to the tumor killed by the CD targeted 20 and neighboring limb lymphoma, thus destroying the tumor through a multitude of self-kill mechanisms. This treatment focuses the drug's activity specifically at the tumor sifts with minimal systemic effects from the radioactivity.

Although ZEVALIN is currently approved in the relapse and refractory setting for nidulant follicular Non-Hodgkin's Lymphoma, for a number of reasons it is unfortunately currently only used in the salvage setting. Many patients who should be received ZEVALIN are not. We hope to change that. The reasons typically given by physicians for not using ZEVALIN fall into three broad categories. Clinical, logistical, and financial. Clinically, one of the most frequently cited barriers is the misperception that once a patient is giving ZEVALIN all future options have been sacrificed. The concern has been that radio-immuno therapeutics damage bone marrow such that patients would not be able to withstand further chemotherapy, Rituxan, or even stem cell transplants. New data was presented by Dr. [Morshauser], the principle investigator of the FITS study which stands for the First line Nidulant Therapy Study at the American Society of Hematology or the ASH meeting last December 2008. The data showed that there is no difference in safety in either second or third line treatments including stem cell transplant, thus making ZEVALIN an appropriate first line therapy.

While a challenge, we believe that educating doctors on its favorable risk-reward profile may help increase usage of ZEVALIN. This will bring the treatment of Non-Hodgkin's Lymphoma in line with the standard of care in other hematologic malignancies. For decades doctors have been treating acute leukemias with first induction therapy to wipe out as much of the disease as possible followed by consolidation therapy, to further reduce any residual disease and achieve a complete remission. And maintenance therapy to sustain the consolidation response thus improving the duration of response. The value of this was demonstrated in the FITS study which showed that of the patients that achieved a partial response after induction therapy, 77% were converted to a complete response after ZEVALIN consolidation. This is important because many doctors consider a complete response after induction therapy to be a surrogate for overall survival. In summary of the FITS data, the trial achieved all end points and showed a roughly two-year advantage in progression-free survival for patients with either a complete response or partial response, who received ZEVALIN after induction therapy.

Now to add address the logistical barriers to the use of ZEVALIN and to provide additional physician support, our tactical solutions include implementation of a centralized logistical support organization, and facilitation of radiotherapeutics license procurement for practices. Finally, we are addressing barriers on the financial reimbursement front. Actions we are taking include physician practice support through our reimbursement programs.

Now I'd like to hand the call back to Dr. Raj.

Thank you, Andy. Now you can see why we believe ZEVALIN is an exciting drug with great potential. I am very excited about ZEVALIN's acquisition and I believe Spectrum Pharmaceuticals is well positioned to maximize the commercial opportunity for ZEVALIN. Within less than ten weeks from now, in July, we expect FDA's decision on our supplemental biological license application or SBLA for approval of ZEVALIN in first line therapy.

Regarding our second marketing drug, Fusilev, it is the only commercially available pure active isomer of leucovorin. We are pleased with the sales trends we have seen to date. Our near-term aim is to maintain traction among practices that continue to use Fusilev. Catalysts for the Fusilev franchise include product differentiation, favorable reimbursement, and potential expansion into larger indications of key colorectal cancer. If approved, in less than five months this year in October this year. In the first quarter, we reported net sales of Fusilev of $9.4 million. We are frequently asked how are Fusilev sales doing now that the leucovorin shortage is over? I am pleased to say that during the first quarter, end user sales were pretty evenly distributed throughout the months of January, February, and March. Each month accounted for roughly one-third of the end user sales during the quarter.

With two marketed drugs and one later stage drug in final stages, along with the strong financial position, and a strong team of committed professionals, I believe we are well positioned to deliver outstanding value to our shareholders. Here are just a few of the key value drivers over the next 12 to 18 months, which we hope to accomplish. Related to ZEVALIN, FDA's decision on our SBLA for first line consolidation therapy is expected in less than two months in July. We also expect to establish reimbursement standards with CMS or Centers for Medicare and Medicaid services and this may happen by early 2010. Related to Fusilev, we expect FDA's decision on our supplemental new drug application or SNDA for advanced metastatic colorectal cancer within the next five months from today, that is in October 2009. And we expect extended uptake of Fusilev in community practices and institutions.

Related to our third exciting asset, (inaudible) or EOquin, we expect to complete enrollment in on going two registration trials. To date we have enrolled more than 1,000 patients and expect to achieve complete enrollment by year-end. We also plan to initiate one additional trial in patients with bladder cancer who have failed BCG treatment.

In addition, signing an Asian partnership is a goal we have established for ourselves. We expect to accomplish this before the year end. But please keep in mind that we will not do a deal for the sake of a deal. It should be a meaningful value driver for Spectrum Pharmaceuticals.

As part of our transition to a commercial stage bio technology company, our primary focus remains oncology. Also as part of our strategy we will continue to balance internal development of proprietary products with the strategic monetization of selected assets. This past year, in 2008, ZEVALIN revenues were $11.4 million, involving less than 1,000 patients. It is important to note that ZEVALIN's current label allows its use in approximately 28,000 patients, 2,000 of which are relapsed and 6,000 are refractory patients. However, as you heard from Dr. Sandler, a few minutes ago, its current use is limited only to therapy, which is in less than 1,000 patients. And we intend to change this.

On the subject of guidance of sales for ZEVALIN, we believe it is too early to offer definitive sales guidance given the upcoming FDA decision in July. Assuming a positive FDA decision, we will need two full quarters of sales data before being able to provide meaningful sales guidance. A main near term objective for ZEVALIN is overall sales stabilization before the end of the year.

With that, I would now like to open the call to questions.

(Operator Instructions). Your first question comes from the line of Ren Benjamin from Rodman.

Good afternoon and thanks for taking the questions and congratulations on an outstanding quarter. I guess just very quickly, several questions. What are the strategies that were implemented over the last several weeks for ZEVALIN? Can you talk a little bit about them? And how is it going as far as stabilizing sales?

Ren, thank you for your question. I will ask Chief Commercial Officer, Amar Singh, to comment.

Great question. I think what we are doing first of all is very successful at making sure that we are taking to the right accounts, measurable what we have obtained is some new accounts that also opened up where ZEVALIN has not been used. We are quite successful in targeting our key accounts. The targeting has been the frame work for the fundamental strategy. In addition, we are look at the reimbursement landscape and we are working very closely with CMS to insure we are able to develop guidelines at some point in time. It is very hard to comment at this point as to how successful we will be. But we are looking with the core organization, which is a separate agency, that includes the radio pharmacies. Its an amalgamation of all these bodies, the real members are supporting us as well. So reimbursement is one aspect that obviously will cover how successful we will be to achieve.

Now one of the things that Raj has referred to you in the, referred to in the past is our targeting of Z-ready clinics. That has been again tied to the full strategy that we have, and ensuring that these Z clinics if you will will ultimately be drivers of sales for ZEVALIN as we move toward forward.

These Z clinics, this still has to get established; right?

No, many are already have the licenses but in addition to the Z clinics we are looking at feeder clinics where license have to be procured. So we are assisting them in that effort as with El.

How big is the sales force now? And where will with the sales force be by years end?

At this point in time, we have a very optimal sales force structure. We are working in the range of 20 to 30 representatives right now. We intend to supplement where we are right now with activities from the medical liaisons as well as sales what you categorize as [stoes]-- which are a nuclear oncologist if you will, who are actually the facilitators of licenses at these many new practices. But one thing going back to your earlier question. We have a target of about 200 plus Z-clinics who are actually ready to embrace ZEVALIN.

Okay, so you mentioned the 20 to 30 reps as well as some additional people, you don't expect to be materially going guard or do you.

We intend to be very judicious to be quite honest. This is a product that has rightfully challenges. We are addressing every challenge one by one and as we get clearer guidance, moving forward in terms of not only just the approval coming through but how the traction is going to be maintained and what increases we foresee will be expanding our sales organization. One of the things that will be very confident in saying to you is that we have been in touch with very seasoned representatives out there. So if the need arises we will be able to rapidly mobilize on that front as well.

Okay. And then regarding Fusilev, Raj, you provided some very nice as far as the end user sales for the months of January, February and March. But going forward, how do you guys think about maintaining this level of, of revenues? Is it unrealistic? Is it, is it reasonable? Is there any seasonality associated with the sales? And then I guess finally regarding Fusilev, is reimbursement an issue at all now that the, the generic shortages isn't a problem?

I will take that question, Ren if I may. Basically what we have been able to do so far is retain the traction based on the experience that many of the practices have had with Fusilev. Now, clearly if you go back and take a look at the catalyst, that would be driving the sales, it is about differentiation and our ability to secure and maintain the favorable reimbursement. Associated with so far. Now clearly, these are the second aspect is a major remain confident that we will be able to create the interventions that we have very successfully so far. There have not been any denials. To the extent question versus emerged. As is very consistent with product thats is are new the game plan, that we have been able to intercede appropriately.

Okay. I guess just very quickly, as an update to pipeline programs? Can you talk about the status? I know at one point near the end of year there was I think Andy was supposed to with doing quite an extensive review on, on your pipeline and deciding on which programs to move forward. Can you comment a little bit about that? And then maybe also any thoughts sort of potential of Ozarelix, the potential to partner given the [sonifaventis] licensing of [Centralics] from [Maternas & Pairs]

Ren, this is Raj. First of all, I would just like to add something to what Amar said, that in addition to the sales team we have medical liaison people who report to Dr. Sandler. We have several of those people who are PHD's or molecular biologists who have expertise in drugs like ZEVALIN. And these people have experienced, they have been working in this area for many, many years. In addition we have what is called nuclear specialist. So the total team comprising of right now I am talking about ZEVALIN is close to 40 rather than 20 to 30 because these are experts who are not sales people but they're experts to take part in education. As you heard from Dr. Sandler, education is a very important aspect of ZEVALIN. This drug has been neglected and ignored since the launch in 2002. Therefore we have taken this challenge head on to make sure we educate and transport the information in an appropriate manner.

Regarding the pipeline, we continue to review aggressively our options. I cannot at this point talk about the specific strategic concentration, but I can tell you that we are making appropriate use of our what Dr. Sandler likes to call "red ribboning" some of our projects. Clearly after the sign the deal with [Centralics] it is a very good thing for us. As you know, we continue to put high emphasis on Ozarelix, remains in a large trial in PPH. The trial is being conducted now at a few US centers, but large centers in India. We are taking advantage of a lot of patient population that exists in India. We have our own people, own MDs and own such people staffed in India. We are not using any CRO. So we are doing a very judicious study in India with Ozarelix. You will hear more about the rest of the program as Dr. Sandler completes his review and prepares background on all these projects, some for out licensing and some for internal development.

Sorry. Just to address one of the comments you made before, you mentioned the 40 team, 40-person team, is that both including ZEVALIN personnel as well as Fusilev? Is it a combined group or should I add, another 20 to 30 reps on top of that for the Fusilev group?

No, no, no. In fact our goal has been how to synergize the marketing and sales team first. Each carry in their bag both Fusilev and ZEVALIN. This very concentrated effort on our part and very deliberate effort to make sure that we have the efficiencies of the sales force.

Okay. I guess just one final question, regarding ZEVALIN, this whole idea of reimbursement, how it is being reimbursed now and how you would like it to be reimbursed in the future, can you talk a little bit about that? And what is involved in working with the CMS and how likely do you -- how likely is it, the chances are that you are successful in the end?

I will ask Amar to give his comments, share his thoughts and comments with you, Ren.

Ren, this is a very complex piece. So, let me go over this very slowly for others as well. Currently, the reimbursement as it stacks out for Medicare and the hospital which is the outpatient hospital setting is based on the cost of charge ratio and the clinic is 95% of AWP or invoice. So this is obviously been a big issue in terms of how does stack up economically for the institutions. Now, the cost charge is based on reported charges in the hospital and basically there's a multiplier factor which is referred to as a charge monster against which reimbursement is applied. So what we are trying to do is essentially make sure that we are able to ensure that the outpatient setting comes out whole and reimbursement process. What we effectively trying to do with CMS is to move down the path of ASG methodology which is the basis for reimbursement for most cancer drugs. That's where we are trying to reach. So we've had discussions, as I indicated to you, with CMS. How certain we are, I mean this is very good about the discussions so far. But we will know a lot more in the months ahead as to exactly whether or not they will accept the ASG methodology.

Perfect, guys. Thank you very much for taking the questions. Congratulations and good luck going forward.

Thank you.

Your next question comes from the line of Shiv Kapoor of Morgan Joseph. You may proceed.

Congratulations on the great quarter. I have a couple of questions on ZEVALIN. The first one on the transition given that you have a coming up, has your transition from CTI been smooth and has the dialogue with the FDA been constructive since the transition? Because there had been a delay earlier in the (inaudible). Would there be an it additional delays or your conversations have been constructive?

Thank you for the question. May I ask Dr. Sandler to comment on Shiv's question, please.

Sure. Thank you, Raj. Good morning, Shiv. On your question regarding the date, and the communication with the FDA, we have had fairly good constructive conversations with the FDA and there's no reason to believe that the date would change. They have all of the materials that they need and everything has been going smoothly. And so we feel that everything is probably pretty much on time and on target.

Secondly on a similar topic, it seemed like CTIC had been talking about spending almost $15 million on ZEVALIN every quarter. It seems from this quarter you're spending a fraction of that. Can you explain whether you have been able to cut a lot of those expenses? Whether those expenses were not really brought forward? Or you expect expenses to go up in the coming quarters.

SHIV, first of all, let me add to what Dr. Sandler said. In fact, you talked about CTIC and how this coordination is working out. In fact we hired one person who was a primary contact between the ZEVALIN CTI and FDA, she now works for Spectrum. So therefore the dialogue has continued very effectively under the leadership of Dr. Sandler.

That's helpful.

Secondly, please keep in mind that we can't comment on how other people run their business and how they were planning to spend their money. There is a reason why they sold the drug. We clearly bought the drug because we saw the potential and saw the synergies with the team at Spectrum that has done it before. We know that how effectively we can market this drug and still keep our expenses burn in a manner that it makes sense for us to be in business with ZEVALIN.

So we shouldn't expect expenses to go up dramatically.

Not to the extent, $15 million a quarter I can asure you that.

One question on Ozarelix, how many patients have you enrolled in that study? And what will be event ratio of US to Indian patients?

I will give you a quick response to that. The sites in the US we have about 15 to 20 sites that are enrolling patients in Ozarelix trial. And in India we have about 35, 30 to 35 sites that will be starting the patients. In India we are still going through the review process by the Indian Drug Controller of India and investigator meeting is scheduled quickly some time soon. So at this time, a lot of leg work has been done in sites already to start enrollment patients but at this time I can't comment as to how many total number of patients have been enrolled.

Okay. And lastly, on Fusilev, has there been, what are the current trends in, you know, the past month or so? Has trends been similar to what you saw in the first quarter? I have to be away from the call a bit. Sorry if you have already answered that.

Yeah. No, we just are restricting our comments today to Q1 earnings call today. It is too early to comment. We don't have, I don't have daily read on the sales for that measure but certainly there will be a time and place for us to discuss business of the second quarter.

Okay. Thanks.

Thank you.

Your next question comes from the line of (inaudible). You may proceed.

Good morning. Thank you for taking my question. I have a quick question. In terms of recording the ZEVALIN sales in Q1 of course you took over 100% ownership some time in March. I'm not sure when exactly that was but I am wondering of the revenues recorded, what is the current run rate of the product? Please?

Let me attempt to answer this question. Keep in mind that we acquired these drugs this drug only in last two weeks of March.

Okay.

That's about, I think March 15th of March 16th we took 100% control over of the drug and therefore the run rate at this time, and we reported sales of $2.6 million top line sales. It is too early to talk about a drug that really requires after a doctor wants to put on a patient it takes several weeks before a patient actually goes on to the trial. So it is too early. April is the only month we have had, and I can tell you that April sales have been to our expectation. It is too early to give you a feedback on any idea about the trends at this time. I think we would need a little bit more experience before we can do that. I I would say maybe in a quarter or two we might be in a better position to give you the answer to your question.

Thank you, Raj.

Your next question.

This concludes our question-and-answer session. I would now like to turn it over to management for closing remarks.

Well, thank you Erica and thank you for your questions. In closing I would like to reiterate the following important points. Today Spectrum Pharmaceuticals is in a very strong position. Here are the five points that I would like you to leave with you today. Number one, we have a diversified revenue stream derived from sales of two very different anticancer drugs namely ZEVALIN and Fusilev. Number two, a third drug EOquin in novel treatment for bladder cancer is in registration trials. The protocols for these trials have been agreed with the FDA and European authorities, they're making rapid advancement toward completing enrollment by the year end. The cost associated with these trials are being supported by a strong partner, thereby reducing our cash burn. Number three, we continue to focus on our balanced business strategy with diversification and a tight fiscal discipline. We balance proprietary development with a strategic monetization of assets. Number four, I am proud of our very accomplished management team, strengthened during the past month by several key hires, covering a broad array of oncology, research and development, business development, and commercial expertise. Number five, we maintain a strict financial discipline with $64 million in cash and a continued commitment to creating shareholder value at a time of unprecedented economic crisis.

Please feel free to contact any one of us at any time if you have questions. We look forward to updating you on our progress during this exciting transformative time at Spectrum Pharmaceuticals. I would like to thank you all once again for your time today. Thank you.

Thank you for your participation in today's conference. This concludes the presentation. You may now disconnect and have a wonderful day.