Spectrum Pharmaceuticals Inc (SPPI) 2009 Q3 法說會逐字稿

Good day everyone, and welcome to the Spectrum Pharmaceuticals Incorporated third quarter 2009 earnings results conference call. This call is being recorded.

At this time for opening remarks and introductions, I would like to turn the call over to Spectrum's Senior Manager of Investor Relations, Paul Arndt. Please go ahead, sir.

Thank you, Laura, and good morning and welcome to Spectrum Pharmaceuticals's third quarter 2009 corporate update conference call. I'm Paul Arndt, Senior Manager of Investor Relations for Spectrum.

Here's an outline of today's call. First Shayam Kumaria, our Vice President of Finance, will provide you with an overview of our third quarter financial highlights. Second, Dr. Shrotriya, our Chairman and CEO, will discuss third quarter events and achievements. Next, Dr. Andrew Sandler, our Chief Medical Officer, will talk about the clinical and medical aspects of ZEVALIN and FUSILEV. Then Amar Singh, our Chief Commercial Officer, will provide an update on our commercial efforts with ZEVALIN and FUSILEV. Finally, Dr. Shrotriya will then offer his remarks before we open up the call to any questions.

Before I hand the call over to Shayam, I would like to remind everyone that during today's call we will be making forward-looking statements regarding future events of Spectrum Pharmaceuticals, including statements about the product sales; profits and losses; and the safety and efficacy, development, timeline, and clinical results of our drug products that involve risks and uncertainty 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, Friday, November 13th, 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 copies of our press releases, historical press releases, 10-Ks, 10-Qs, 8-Ks, SEC filings, and other important information, please visit our website at www.SPPIRX.com.

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

Thank you, Paul and welcome to everyone on this conference call. I would like to just cover the key financial highlights from the third quarter and the year-to-date operations. These are as follows, and please note that all the numbers that I refer to are approximates.

The third quarter consolidated revenues were $7.1 million, which included $5 million in product sales. Product sales broke out as follows. $4.7 million from ZEVALIN, which is an 80% gain over the first quarter revenues in 2009, and an 80% gain over the third quarter of 2008 ZEVALIN sales as reported by our pharma partner, and included $300,000 of revenues from FUSILEV. Year-to-date consolidated revenue through September 30, 2009 was $29.4 million and included $23 million in product sales, $10.6 million from ZEVALIN and $12.4 million from FUSILEV. These revenues compared to $20.7 million of one-time nonrecurring revenue in the same period of 2008, derived from the sale of rights to certain non-core products.

The quarterly loss for the third quarter was $8.4 million compared to a net loss of $8.8 million in the comparative third quarter in 2008, and the year-to-date 2009 loss was $17.5 million compared to a loss of $6.8 million in the same period of 2008. The principal reasons for these fluctuations in 2009 were as follows. In 2009, we recorded reduced research and development expenses, mainly due to a sharing by our partner Allergan in Apaziquone related development costs and a reduction in costs related to other pipeline products. Our selling, general, and administrative expenses increased due to the direct cost of commercialization activities of ZEVALIN and FUSILEV and their related payroll costs.

The year-to-date loss in 2008 was favorably impacted by the $20.7 million of one-time nonrecurring revenue from the sale of rights to certain non-core products in 2008. In 2009, net cash used in operations year-to-date, September 30, 2009, was approximately $7.1 million. During the third quarter, we issued 6.6 million shares of common stock for $50 million in gross proceeds, and at the end of September quarter, we had cash and short-term investments of $143 million compared to cash of $106 million at the end of the June quarter. Also, at the end of the third quarter, we had approximately 48.7 million shares issued and outstanding.

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

Thank you, Shayam. Let me also welcome you to our conference call today. At Spectrum, we continue to build value for our shareholders while distinguishing ourselves from our peers. We now have two FDA approved proprietary anti-cancer drugs on the market, bringing sales revenue. In the past nine months, we have already received more than $23 million in product revenue. We have a lead cancer drug in Phase III pivotal registration trials for bladder cancer. The majority of the financial support for the development of this drug comes from financially strong and successful partners. We have a proven team of experienced and committed professionals fully in place. We have never had a stronger cash position than today. With cash at hand, we are well positioned to execute on our strategy and build a successful and profitable company.

At this time, we believe that among our pipeline drugs, Apaziquone, formerly known as EOquin, has the highest value to the company. So I'll start by recapping the events that have occurred since our last call, starting with Apaziquone. In line with our stated goal of finding an Asian partner by year end 2009, earlier this week on November 10th we announced that we have cemented an Asian partnership with Nippon Kayaku, a leading Japanese pharmaceutical company with a strong Asian presence in oncology. Under the terms of the agreement, Nippon Kayaku will pay us $15 million up front, and will make additional payments of up to $136 million based on the achievement of certain regulatory and commercialization milestones. In addition, we will receive double-digit royalties on sale of the drug. Nippon Kayaku will conduct the clinical trials pursuant to a development plan. Importantly, Nippon Kayaku will be responsible for all development and commercialization expenses in their territory. With the confirmation of the Asian deal, we have created a potential value of nearly $0.5 billion from this single asset. Please keep in mind that we paid only $100,000 for this drug in 2001. As a reminder, Spectrum is currently conducting two Phase III clinical trials in bladder cancer. Spectrum is on track to achieve yet another milestone as a result of completion of enrollment in our Phase III studies by year end 2009.

Let me now talk briefly about ZEVALIN. On September 3, the FDA approved ZEVALIN as first line therapy for the treatment of follicular non-Hodgkin's lymphoma. You should note that ZEVALIN is no longer relegated to [followup] therapy, whereby less than 1,000 patients were treated in the entire 2008 year. With the new approval, the addressable market size is significantly higher, with approximately 43,000 patients. We remain committed to the goal of realizing the full commercial potential of ZEVALIN.

I'm pleased to tell you that we have successfully met our previously stated goal of stabilizing the historically declining sales of ZEVALIN. Sales of ZEVALIN for the quarter were $4.7 million, a gain of 42% over the second quarter 2009, and an 80% gain over first quarter 2009. We were able to achieve this goal despite having received ZEVALIN approval in the first line setting with a mere three weeks left in the quarter, despite the lack of reimbursement methodology and despite new competition in the setting. Last week, we announced that CMS finalized a policy to allow reimbursement for ZEVALIN in the Hospital Outpatient Prospective Payment System, or HOPPS, based on this average sale price methodology, applicable to other injectable drugs and biologics. This reimbursement ruling will go into effect in about seven weeks on January 1, 2010. We are pleased with this policy, as it represents an important milestone towards establishing a consistent reimbursement standard for ZEVALIN, and I might say for the first time since its launch in 2002. We believe that securing this reimbursement ruling for ZEVALIN represents one critical step in facilitating the broader update of ZEVALIN in the marketplace. Our current effort is directed in obtaining similar reimbursement in the community setting, and this remains one of our highest priorities.

We recorded sales of over $2 million in October, which is the highest one month sale in its recent history. We are very pleased with increasing acceptance of ZEVALIN in the community and the traction that we are beginning to see since receiving positive action from multiple fronts -- namely, one, firstly we got FDA approval in first line setting in September. Secondly, National Comprehensive Cancer Network or NCCN classification for ZEVALIN as category one. As you know, NCCN classification is utilized as the principal basis for reimbursement. And number three, we received CMS ruling for reimbursement. We believe that our strategy of removing many barriers to its acceptance one by one have started to work in ZEVALIN's favor.

Moving on to FUSILEV, let me remind you that FUSILEV is currently FDA approved and marketed for osteogenic sarcoma to diminish the toxicity and counteract the effects of impaired methotrexate elimination and inadvertent overdose of folic acid antagonists. However, on Friday, October 9, we announced that the FDA issued a complete response letter for FUSILEV in response to our supplemental New Drug Application for advanced metastatic colorectal cancer. The FDA recommended that we meet with them to discuss options for FUSILEV in advanced metastatic colorectal cancer. Our meeting is now scheduled for January 2010. As such, we will defer from making any comments on the complete response letter and our regulatory options until we have met with the FDA, at which time, we will provide you further material updates.

Please note that FUSILEV is already approved and marketed for more than 10 years for colorectal cancer in Europe and Japan, and is marketed by companies such as Sanofi-Aventis, Wyeth, and [Tageta] Pharmaceuticals, among others. It ex US annual sales have been approximately $200 million a year. It may be worth noting that we did not pay any cash upfront when we acquired FUSILEV, and the money we made from sale of FUSILEV we used to acquire ZEVALIN. It has generated more than $20 million in sales revenue since its launch in August 2008.

I will now ask our Chief Medical Officer, Dr. Andrew Sandler, to discuss ZEVALIN and FUSILEV. Andy?

Thank you, Raj, and welcome everyone to today's call. As you are all aware, on Friday, September 4, 2009, the FDA approved ZEVALIN as part of first line therapy for the treatment of follicular non-Hodgkin's lymphoma. We are very excited about this as this significantly increases the addressable market opportunity for ZEVALIN. ZEVALIN is now indicated for the treatment of previously untreated follicular non-Hodgkin's lymphoma in patients who achieve a partial or complete response to first line chemotherapy. This means that when a non-Hodgkin's lymphoma patient has a complete or partial response to their first line chemotherapy regimen, they're able to receive ZEVALIN. As a reminder, ZEVALIN is also FDA approved for treating relapsed, refractory, low grade, or follicular B-cell non-Hodgkin's lymphoma, including patients with rituximab [refractory] follicular non-Hodgkin's lymphoma.

ZEVALIN combines the tumor targeting ability of an anti-CD20 and monoclonal antibody and a tumor-destroying power of localized Yttrium-90 radiation. The radio-labeled antibodies can specifically bind to the tumor, killing both the CD20 targeted cell and its neighboring lymphoma cells, thus destroying the tumor through multiple cell killing mechanisms. This treatment also focuses the drug activity at tumor sites with minimal systemic effects from the radioactivity. We believe ZEVALIN is an important first step in bringing 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 leukemia with induction therapy, which wipes out as much bulky disease as possible, followed by consolidation therapy to further reduce any minimal residual disease and to provide the patient with the best quality and duration of response possible -- and maintenance therapy, to sustain the consolidated response, thus improving the duration of response.

The value of using ZEVALIN in a first line setting was demonstrated in the FIT study, or the first-line insulin therapy study. The FIT study achieved all of its end points and [had] impressive roughly two year advantage of progression free survival for patients with either a complete or partial response who received ZEVALIN after induction therapy. Notably, updated data were presented at the American Society of Hematology or ASH meeting last December by Dr. Morschhauser, one of the principal investigators of the FIT study. The two-year progression-free survival was updated to reflect a three year progression-free survival advantage. A three-year progression-free survival advantage is very significant in this patient population. As you know, many cancer treatment regimens measure their success in only weeks, not years.

The FIT study also demonstrates an unprecedented rate of conversion from a partial response to a complete response as a result of consolidation with ZEVALIN. 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 complete response after induction therapy to be a surrogate for overall survival. We are also working at the FDA's request to complete an analysis which may ultimately lead to the removal of the bioscan requirement. The bioscan is not a required element of ZEVALIN therapeutic regimen in many countries outside the United States, specifically in the EU. In the FIT study alone, the majority of patients did not receive a bioscan. If we are able to remove the bioscan successfully, the process of giving ZEVALIN and the ZEVALIN therapeutic regimen would be reduced to no more than a couple of hours, significantly simplifying the treatment process.

As you all know, on Friday, October 9th, the FDA issued a complete response letter for FUSILEV in the advanced metastatic colorectal cancer study. Our meeting is scheduled for January 2010. As Raj said just a few minutes ago, it would be very premature at this time to speculate on what the FDA will ask or require following the meeting. With that said, however, we will provide you with material updates once we have met with the agency.

I'm now going to hand the call over Amar to discuss the ongoing efforts with ZEVALIN. Amar?

Thank you, Andy. I plan on providing with you a quick update on ZEVALIN sales, followed by an update on our comprehensive commercial efforts to grow the brand.

ZEVALIN sales in the third quarter were approximately $4.7 million, which represents a 42% increase over the second quarter sales of approximately $3.3 million and an 80% increase over first quarter sales of approximately $2.6 million. I believe it is important to place this achievement in perspective. Firstly, we accomplished this in the absence of receiving regulatory approval on ZEVALIN in the front line setting. We received front line approval with only three weeks left in the third quarter. Secondly, such an accomplishment was made at a time of heightened competition in the refractory NHL setting, which occurred in the latter part of last year. Finally, this has occurred in a period where we are actively addressing fundamental issues such as physician referral patterns, [access] related issues, and reimbursement economics. At the outset I will state that we have taken on several large initiatives to address market and product related issues to drive the sales of ZEVALIN since we acquired the drug less than eight months ago. We continue to remain confident both in the commercial opportunity for ZEVALIN and in our ability to fully realize this opportunity.

At this time, I would like to update you on some of these global initiatives that will directly impact the brand's performance. Let's talk about reimbursement. As you know, since our involvement with ZEVALIN, we have necessarily had to have a multi-pronged focus which has been to simplify Medicare reimbursement for hospital outpatient providers and patients by presenting to CMS an option to reimburse ZEVALIN and at the average selling price methodology. We have received excellent guidance from CMS and were able to furnish them critical information that has led to their recent decision to grant ASB based reimbursement. This ruling by CMS finalized a policy to allow reimbursement for ZEVALIN in the Hospital Outpatient Prospective Payment System, or HOPPS, based on average selling price methodology that generally applies to other injectable drugs and biologics. As Raj has previously indicated, this reimbursement methodology is to go into effect January 1, 2010. We are very pleased with the CMS policy ruling, as it represents an important milestone toward establishing a consistent reimbursement standard for ZEVALIN. This milestone facilitates the broader object of ZEVALIN in the institutional setting.

So what does this all mean? Number one, streamlined reimbursement in the hospital outpatient setting for Medicare eligible patients. Number two, this validates our patient ready dose distribution model. This means that we can control all financial transactions related to ZEVALIN. Importantly, this also means there is only one methodology for reimbursement of ZEVALIN, which helps hospitals better predict the pharmacoeconomic value to their institution. Very importantly, this takes away the uncertainty associated with reimbursement for both the referring physician and the institution, so we have essentially now made it extremely simple for physicians and institutions to take advantage of ZEVALIN. Our next set of efforts is being directed at getting similar reimbursement in the community setting. This is a very high priority for the company and the process is ongoing.

With respect to other aspects that dictate the guidelines for reimbursement, private and government payers are continuing to use SCCN guidelines as an impartial reference base to facilitate reimbursement decisions. Earlier this year, the FIT study was used as the basis for the category one recommendation in the NCCN guidelines, explicitly supporting the use of [regular] therapy such as ZEVALIN in the first chemotherapy setting. Keep in mind, category one is the highest recommendation available and we view this achievement as a noteworthy milestone for ZEVALIN. You should note that to date we have not had even one case of denial as far as reimbursement for ZEVALIN is concerned.

Let us now look at some of the tactics we have implemented to address the logistical issues that have hindered ZEVALIN's use. I am very pleased to tell you that we have been able to make solid progress on this front by being able to influence physician referral patterns. While it is still too early to provide you specific numbers, we are beginning to witness for the first time some very important trends with respect to this dynamic, where more physicians who do not have the capability are willing to refer their patients to sites that can administer the drug. They've also made better than expected in-roads in our reach into accounts that have until recently been dormant. These accounts have been reactivated and have begun reusing ZEVALIN. Just for your understanding, a reactivated account is an account that previously used ZEVALIN, but has not used ZEVALIN in the last 12 months. Ladies and gentlemen, today we have close to 90 accounts that have been reactivated since we took over this product. While this is an ongoing process, it takes time to gear up in these accounts. As much as 57% have actually now prescribed the drug. Of all accounts ordering so far, over one-third is represented from reactivated accounts, and this in our view is indicative of a very important and positive trend.

Finally, one of the underlying issues behind ZEVALIN's lack of growth has been the limited share of voice and lack of promotional efforts for this brand. By the end of this year we will have optimally expanded our commercial infrastructure, and coupled with increased promotional efforts, Spectrum will be in a position -- a solid position, I might add -- to address these issues. The [competencies] that come with this expansion will be substantial and directly impact the future growth of this brand. Our progress in terms of leveraging ZEVALIN's clinical merits, with the success of associated reimbursement economics, is very substantial.

So today we have the front line indication. We have reimbursement support from NCCN and CMS. We have strategic collaboration with all key customers that matter in the pull-through of an oncology product in the United States, and we are right-sized as commercial organization. It is also now clear that we have systematically and successfully begun to address all issues around ZEVALIN. As we approach the end of the year, we have continued confidence in our commercial efforts. With our drug, we believe represents an important new therapeutic options for patients in the fight against non-Hodgkin's lymphoma.

Thank you very much for your attention. I'll now hand the call over to Raj.

Thank you, Amar. With two marketed drugs, one later stage drug recruiting patients into registration on pivotal trials, a strong team of committed professionals, and a strong financial position, we believe Spectrum is well positioned to deliver outstanding value to our long-term shareholders.

Let me highlight a few of the milestones achieved to date in 2009. Related to ZEVALIN, we received a remarkable FDA approval in the first line setting. We received National Comprehensive Cancer Network category one recommendation for ZEVALIN. We received CMS ruling for reimbursement. We expanded the sales force and we continue to work on similar reimbursement strategy for the community practice setting. Our near term goal is to focus on ensuring that ZEVALIN, an outstanding single dose regimen for non-Hodgkin's lymphoma, can reach more patients. After all the barriers are removed and with greater acceptance by the community, we believe that the sales of ZEVALIN will continue to grow until they reach full potential.

Related to FUSILEV, we are meeting with the FDA in January to explore our regulatory options in the setting of metastatic colorectal cancer. We intend to maintain a strong presence with accounts who have experience with the drug. Please keep in mind the drug is already FDA approved and has had sales revenue of more than $20 million since its launch in August 2008, and we used this money to buy ZEVALIN. Related to Apaziquone or EOquin, as mentioned earlier, we are very pleased to sign a partnership for Asian [data] with Nippon Kayaku with solid financial terms.

With respect to the ongoing Phase III studies, to date we have enrolled more than 1,500 patients and continue to expect to meet our enrollment target by the year end. As part of our transition to a commercially staged biotechnology company with a primary focus on oncology and as part of a balanced risk management and resource conservation effort, we will continue to balance internal development of proprietary products with a strategic monetization of selling assets. We believe our strong financial position increases our ability both to achieve our stated corporate goals and to be opportunistic and creative with our strategic options.

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

Thank you. (Operator Instructions). We'll take our first question from Ren Benjamin from Rodman.

Congratulations on the progress. Very quickly, maybe to get this out of the way, seems like FUSILEV revenues, which were quite high in the beginning of the year, tapered off in the second quarter, primarily due to the generics coming back online. Seems to have completely fallen off a cliff for the third quarter. And so I guess the question is why did this -- do you guys have a good sense as to why this has happened? Was there just an overstuffing of the channel as people hoarded FUSILEV since there was a shortage in the beginning of the year? Or is there something more fundamental that's occurring?

Ren, thank you very much for asking your question. So let me just make a comment here that the -- keep in mind that our strategy -- since we acquired this drug in 2006 and we got approval in 2008, our strategy has always been that the 95% usage of FUSILEV is in metastatic colorectal cancer, period. We got that approval for strategic reasons for a very small indication, and at that time we didn't expect our sales to be even $1 million a year. We were expecting approval of FUSILEV for colorectal cancer.

What happened -- what brought us $20 million in sales is a tailwind that we got. There was a shortage of leucovorin in the marketplace and actually FDA came to us, FDA asked us to make this drug available. ASCO sent out e-mails to all the prescribing physicians. We got publicity as Spectrum Company that we couldn't have gotten by spending tens of millions of dollars. When our sales force today selling ZEVALIN goes into an office of a doctor and says he's from Spectrum they say oh, the FUSILEV Company. Because all the practicing oncologists were bombarded by repeated e-mails from ASCO that if you don't have access to leucovorin, you can use FUSILEV and you can go to the website, www.spectrumpharm.com.

We never expected anything in terms of revenue from FUSILEV until its approval for metastatic colorectal cancer. We got very lucky, and opportunistically when we got those sales, we used that money -- instead of paying some bills, we used that money to buy -- acquire even a better asset called ZEVALIN. And we are very proud of that, very quick decision making in turning something -- FUSILEV that we acquired for almost no cash, converting it into acquiring ZEVALIN, which is the highlight of the company today.

Right. And so that -- it makes a lot of sense and I think you guys utilized the asset extremely well. Thinking about the FUSILEV revenues that even in the first quarter of launch were better than our estimates for sure. It seemed like there was off-label use that was driving those revenues higher than what we would have expected. I guess my question is in third quarter it even seems to have fallen below that. Is that because there's an excess amount of FUSILEV that's out there? Or is there since let's say the denial of the FDA for colorectal, people just have decided to go back to generic leucovorin?

Let me try to answer it in two different ways. First of all, keep in mind that we cannot promote -- our salespeople cannot promote, cannot talk about FUSILEV in colorectal cancer, period. That wasn't the case when there was a shortage of leucovorin when we were inundated by calls directly from the hospitals and from clinics, can you provide FUSILEV to us. That's one basic difference. Keep in mind the potential of FUSILEV still remains very high. The ex US sales of FUSILEV are approximately $200 million a year -- tell us that if we get approval, if and when we get approval for colorectal cancer, we think FUSILEV again could be a very important drug in our portfolio.

Got it. Okay. Switching gears to ZEVALIN. The ZEVALIN revenues, as you mentioned, have stabilized and are actually increasing quite a bit. You made a point to say in the conference call that you think this bump-up in revenues, this increase to $4.7 million is most likely not due to the front line approval, if you will. And so we're assuming that okay, this is all additional organic growth in the salvage setting. Can you give us just a sense as to what the -- how much the patient population I guess is -- how much penetration you've gotten into the patient population in the salvage setting?

Well, Ren, let me try to answer this question. I could have asked Amar or Andy to comment, but I will for the brevity, and for the importance of time. Let me just say the following. I think the -- it's too early to talk about where the sales are coming from. This is for the first time that now we have a concerted effort that the whole company is behind ZEVALIN. And all of the approval came on September 3 of this year, six, seven weeks ago. But don't forget that the article about the FIT study was published in November of last year. So the oncologists -- hematologists, oncologists are people who read literature. They are the ones who read and act accordingly. So the drug has been in the limelight I would say since the late last year, when the drug was first published. It has started coming to limelight. For the first time that Spectrum hired sales force, we had 24 salespeople, kicking the tires. Before Spectrum got in the picture, mind you, there were less than 10 people promoting this drug at a company with significantly less resources behind the brand. So I think it's -- still, we are not satisfied with the $4.7 million sales. We just see the beginning of a much bigger sales that we expect. I mean, so I just think that our efforts have started bearing fruit at this time and we'll have to wait a couple or quarters before we can talk about what we expect in terms of sales.

So there are a quite a few initiatives that you have in place right now, right, a checklist if you will of things that need to come together in order for you to create this brand awareness and probably hit the road running at full speed. And so of course several of these have already been checked. You have the data from the FIT trial. You've gotten approval, so you have a broad label. Reimbursement has -- at least one of the check boxes has been done with the hospital setting and you're working on the community. Can you talk a little bit more of what's left? What more needs to -- of the hurdles need to be knocked down in order to hit your stride? And then also regarding the launch and the revenues generating right now, how are you evaluating your current tactics? How do you know that it's the most efficient use of time of your sales reps? Are you opening up the right amount of accounts as you had originally projected? Is it ahead of schedule? Behind schedule? Can you give us a sense of that.

That's a very good question, loaded question. I'll just tell you that everybody in the company, the highest priority today is to achieving sales of ZEVALIN. So at this time, I would like to ask our Chief Commercial Officer, Amar, who is -- to his credit, he has earned stripes on selling many difficult drugs in his past life. So Amar, would you give a little bit more granularity to Ren, please?

Sure. By way of granularity, it's a little bit difficult. What I will say to you is that in the launch of any new brand, particularly one that has been stagnating for a number of years, the impact on many of these activities just take a little bit longer than would ordinarily be the case. I think we are ahead of expectations in terms of being able to address the multitude of issues that we identified when we brought this product in, in terms of being able to execute imperatives that made a lot of sense, and imperatives that have actually fundamentally made a striking difference in our ability to as an example turn around the dormant accounts. The pace at which this is being done is very good. We are very satisfied with it. I think as we look forward, there are numerous dormant accounts that still need to be opened. Remember at one point in time, this product touched 476 accounts. So as we expand, and this is why the notion of being sized right is very critical, we believe that we will be executing on all cylinders over the next several months to effect the turnaround for this brand, which has already begun to occur.

What is the right size, Amar? What do you want to grow the sales force to by the end of the year so that you have that right balance of spending enough money to make sure this is promoted and give it the best chance possible as opposed to overspending and hiring too many people and just increasing the operating expenses that won't get matched in any way to the revenues coming in?

That's a very important question again. I think we've been extremely prudent in terms of how we've gone about doing simple things like targeting representatives weeks in advance of their approval. Offers were not made at that point in time. We knew very well exactly how the alignment of the territories would be occurring. We were able to bring many of these folks in. I think we have no more than perhaps six additional representatives that need to be hired to come to a full grip with 48 reps by the end of the year.

Additionally we're expanding in the account management front. We are expanding in the front of the oncology specialists and I will say to you that with the confluence of medical liaisons, these three -- I would call them support groups for the sake of just this discussion. All these folks have worked very collectively to effect the turnarounds in this account.

I'll give you the case of Florida. Florida is a prime example. Just like in elections, you look at Ohio and Florida as turnaround states. We launched this brand -- I have yet to launch a product brand which literally off the bat can succeed in a state like Florida. Florida is a prime example of a turnaround state for this product.

So we have been very systematic in terms of identifying the issues. We've been very systematic in terms of picking up the tactics that make a difference. You talked about our using the resources effectively. I will say to you that we are looking at tactics that yield a good return on investment. And this can -- I can only say, Ren, that this is based on past experiences amongst the collective team. I will also say one thing, and this is a testimony to the field organization. Not everybody can sell this product. But we have really brought to bear a team of people that can roll up their sleeves and execute. It's just about plain execution moving forward.

And thank you Amar. I'll add one more thing here. That our medical team under Dr. Sandler and commercial team under George and Amar, they're working in sync. So there are a lot of activities that are being done under the Medical Affairs department. Andy, maybe you want to say a few words.

Sure. We have a huge scope of activity that's occurring under the Medical Affairs realm, from a multitude of advisory boards with the top key opinion leaders who once were not engageable with radioimmunotherapy and nowadays are embracing ZEVALIN and ZEVALIN's use and actually its FIT data. In addition, we have CME programs or medical education programs that are going on at major conferences in addition to in the community, regarding the education in radioimmunotherapy as [outdated] efforts, specifically with ZEVALIN.

Lastly and I think the most important piece is our Medical Scientific Liaison group, which all of them have come from areas of other lymphoproliferative diseases, just are really in sync with the actual community doctors, the Tier 1 and Tier 2 key opinion leaders regarding ZEVALIN and its use. For the first time ever, radioimmunotherapies now is part of larger symposia. It's going to be part of an ASH symposium this year that's being put on at ASH. It never has in the past. It's always been neglected and forgotten. It's part of curriculum now. I think this is an enormous achievement. And it's an achievement that's been done through our efforts.

Andy, I'm glad you got on and started talking a little bit. I've got just two questions for you. Obviously the ASH conference is coming and you mentioned the symposia. Clearly ASH is very instrumental in getting the message out to physicians. Will there be updated FIT trial data at ASH for presentation? And if not, are there any presentations that you think are very worthy to look at? And I guess similar to that, there's a lot of debate as to how maintenance Rituxan fits into all this. Can ZEVALIN even come in between maintenance Rituxan and induction therapy? And I guess if you have any comments regarding the recently announced [PRIMA] study.

Sure. So a couple of things. First, on ASH, like I said, it is part of a large symposia that will be on in ASH this year. I think that we're going to expect a lot of ASH abstracts, over 10 this year ranging from consolidation therapy to bone marrow transplant, [preventative] regimens, all of them I think are going to be very supportive of the messages that we are putting out there regarding ZEVALIN. This year there will likely not be a follow-up to [SID], purely because it would happen at the following year. It's an every two year. So we wouldn't have expected it this year anyway.

As for the maintenance Rituxan message, and I think it's an important one here, is that we really don't know the specific results of the PRIMA data and I think that, again, you're talking about two clearly very different issues here. One's a consolidated effort and one's a maintenance effort. And what we've known as I talked about specifically previously, consolidation and maintenance are very different things. To get induction therapy and to go on to maintenance therapy may not be equivalent to receiving consolidation therapy. I believe at this point right now, since we don't know the results of the PRIMA data, we don't know what the duration of those responses clearly are and we don't know what its progression free survival advantage is, I don't think anyone can make any assumption at this point.

You might know that -- you must know that the reduction maintenance NCCN has categorized at category two while ZEVALIN is categorized number one. So that is a very important distinction that is starting to appear at the level of NCCN.

That's a very good point. One last question for Shayam. The $15 million upfront that's coming from the Asian partner, just how will you recognize that? How far out do you amortize it?

Shayam?

Sure. We will recognize it over the period of our obligations and our obligations essentially are to support the development of the product in Japan. So essentially it's going to be about the same period that we amortize the Allergan revenue.

Thank you very much and good luck.

We'll go next to Shiv Kapoor with Morgan Joseph.

Thanks for taking my questions. Let's start with a question that Ren asked, maybe ask it in a different way. If you don't get an approval in colorectal cancer for FUSILEV, would you expect minimal sales from FUSILEV?

First of all, I don't like to think in negative terms. This is a drug that is -- that has been approved and is accepted not only all around the world -- during the shortage of leucovorin, we sold $20 million worth of drugs, treating 4,600 American patients with colorectal cancer. So I want to hear what the FDA has to say about this. This is not a new chemical entity that for the first time is being given to a man and we have no idea about the safety and efficacy. That is not the case. It is a drug that's already approved by the FDA in the United States and is now approved in other countries for colorectal cancer and it's selling and accepted and selling close to $200 million a year. So I don't want to accept a very negative comment on it. And until that happens, we aren't going to comment because we have already said that we expected sales of this drug, 95% usage of FUSILEV comes from colorectal cancer. So it has been part of our strategy that colorectal cancer is an important avenue for FUSILEV sales, period.

The clinical results for that drug have been good, so we were all surprised by what the FDA said, but it seems like you are confident about your arguments, what you're going to present to the FDA.

I don't want to comment on this conference call about our strategy until we have really met with the FDA. But clearly, we have -- as a physician, personally, I have a lot of confidence in FUSILEV. This is a drug that has been used, accepted widely. In fact, if we look at [Kada's] annual report you will see how nicely they talk about FUSILEV in their portfolio.

Okay. Fair enough. Can you talk about what your gross margins for ZEVALIN are and what we should expect in the future?

Well, these are consistent with any biological drug, and I think at this time that's all I can say.

So about 80% or lower than that?

I'm not at liberty at this time to give you that precise granularity actually, as there are some of the things we are still working on.

Okay. Do you think you will need manufacturing capacity expansion for that drug, given that you're seeing strong trends?

We are looking into it as we speak right now. In fact, that's part of our strategic planning, that we are very aggressively pursuing -- Michael Adam, Dr. Michael Adam who is head of our pharmaceutical operations, he is devoting a significant amount of time looking into this aspect.

What is your current capacity?

We can supply currently -- these are antibodies that are produced in bulk and kept in a deep freezer, so we have capacity at this time to produce as many vials as there are needed. But we'll have to see over long run, over the next two, three, four years what kind of demand there is and when do we have to make the antibody.

A couple more questions. Have you given any guidance on cash at the end of the year? I might have missed that, if you have.

Well, so far we have not given guidance, but you can see that in the first nine months we have burned $7.1 million cash. Tell me a company that has so aggressively working on multiple fronts and burns cash as frugally as Spectrum does. So I don't like to give guidance at this time, because we are very opportunistic. We are working in multiple fronts. We are growing our organization. We are looking at other opportunities. So a lot is happening in the company. We really work 24/7 in this company. We're looking at multiple things and we're working as aggressively as we can. So at this time, I'm not comfortable -- but you should be comfortable that this company has enough cash and we don't have to go to the well.

Sure seems like that's true, that you do work 24/7. My last question, your R&D and SG&A came down last versus last quarter, this quarter. Is that a trend that will continue going forward or were there some anomalies this quarter?

Let me again say, this goes to the strength of the management and how we manage our cash flow. And how we -- we don't use CROs, we don't have long-term commitments. When we saw the data on Ozarelix that the study of [internalization] was negative, [large pivotal] was negative, we slowed down our expansion plans for Ozarelix. Clearly -- and the other major drug that is being fully funded and fully supported aggressively in the company, Apaziquone, the majority of the funding is being done by Allergan. So those are the two primary reasons and we are very frugal when it comes to G&A. We don't like to spend any money, period.

Fair enough. Thank you so much for answering my questions.

We'll take our next question from Stephen Dunn with Jesup & Lamont.

Good afternoon and congratulations on the first line approval and I think more importantly on the reimbursement issue. That's been dogging this drug for years. I guess what I'd like to ask is as -- I know you're concentrating on moving in first line therapy. What I'd like to talk about is retreatment. I remember several studies, smaller studies and some anecdotal discussions of [ibritumomab] in retreatment, and I really never saw anything bad. It always seemed to be well-tolerated. I guess what is your, if any, strategic marketing direction going from first line and then retreatments going after that? And do you have any data internal or otherwise that would indicate there is a gating entry exposure?

Hi, this is Andy Sandler, and you asked a very good question, so thank you. You're right, there was -- there has been some studies that have been done in the past that looked at retreatment with ZEVALIN, and they actually did show not only obviously some efficacy results but very good safety profile in those select patients. We do have some studies that are ongoing right now, so I guess my short answer to a very good question is stay tuned.

Okay. Sorry to leak it publicly. That was -- a lot of that was in 2006, if I recall. And I have one last question, it's more of a philosophical question. On FUSILEV for colorectal -- and this is totally hypothetical, but if it seems to be a requirement, and this is a big if, that you will need to do another clinical trial, are you committed that strongly to FUSILEV in colorectal that you would commit funding or financial backing to do another clinical trial? Or at that point do you think you would just leave it alone and let a partner fund something like that?

Steve, that's a difficult question and I would like to reserve comment on this until we have met with the FDA.

Okay. Had to ask. Anyway, congratulations especially on that reimbursement.

Thank you very much.

There are no further questions in the queue at this time. I'd like to turn the conference back over for any additional or closing remarks.

In closing, first of all, I would like to thank all the listeners and all the people who asked very interesting questions. In closing, I would like to reiterate the following very important points or take-away messages. This has been a tremendous turnaround year for Spectrum. We have accomplished many things, including completion of acquisition of ZEVALIN, which was a very important aspect for the company. We received FDA approval for ZEVALIN in the first line setting. We raised more than $100 million. We signed an Asian partnership for more than $150 million in value, and we have built an efficient internal infrastructure.

In a nutshell, really what we have at Spectrum is a very diversified company -- diversified revenue stream, diversified pipeline, revenues coming from two different anti-cancer drugs, namely ZEVALIN and FUSILEV. A third drug, Apaziquone, is in later stage trials, pivotal trials for bladder cancer. We will continue to be opportunistic regarding the strategic monetization of our assets. We have built a very strong management team with a solid track record in oncology drug development and marketing. Last but not least, we maintain a strict financial discipline, having more than $140 million cash and equivalents at the end of the quarter and a continued commitment to creating shareholder value. We don't see any need to go to the well in the short run.

We look forward to updating you on our progress and I would like to thank all of you for your time today.

That does conclude today's presentation. We thank you for your participation.