Spectrum Pharmaceuticals Inc (SPPI) 2010 Q1 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the first quarter 2010 corporate update conference call. At this time all participants are in a listen-only mode. Later we will conduct a question-and-answer session and instructions will be given at that time. (Operator Instructions) I would now like to turn the conference over to your host, Mr Paul Arndt. Please go ahead.

Thank you and good morning everyone. This is Spectrum Pharmaceuticals first quarter 2010 conference call. I am Paul Arndt, Senior Manager of Investor Relations for Spectrum Pharmaceuticals. Here is an outline of today's call. First, Shayam Kumaria, our Vice President of Finance, will provide a summary of first quarter financial performance. Then Dr Raj Shrotriya, our Chairman, Chief Executive Officer, and President, will highlight our first quarter 2010 accomplishments and provide the outlook for the rest of 2010 before we open up the call to questions.

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 product sales, profits and losses and the safety efficacy, development of the timelines and clinical results 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, Tuesday May 11, 2010, 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 yesterday's press release, historical press releases, 10-Ks, 10-Q, 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.

Paul thank you very much. Good morning to everyone on the call. I'd like to present just the financial highlights of the first quarter 2010.

Our consolidated revenue for the first quarter was $11.1 million. Representing a 29% growth sequentially over the fourth quarter of 2009. Likewise, Zevalin sales were $6.5 million, an increase of 27% over fourth quarter 2009. In addition, we received $16 million from Nippon Kayaku and Handok Pharmaceuticals for the apaziquone licensing for the Asian territories.

R&D expenses in the first quarter consisted of $6.5 million in operating expenses and a $30 million one-time payment for licensing belinostat, a novel HDAC inhibitor. SG&A expenses were $10.9 million compared to $6.4 million in the corresponding quarter last year. The $4.5 million increase was attributed to the increase in the sales and marketing organization, including commercialization activities for Zevalin. Including the one-time $30 million payment for belinostat, the net loss for the first quarter was approximately $39 million.

As of March 31, 2010, we had cash and investments of nearly $100 million compared to $125 million at December 31, 2009. Currently, there are nearly 50 million shares of common stock outstanding. With that, I would like to hand the call over to Dr Raj Shrotriya. Raj?

Thank you, Shayam. During the first quarter, we have continued to make progress with our two marketed oncology products in our pipeline. I'll start with our lead product Zevalin, which we acquired a little over a year ago and relaunched it in the fourth quarter of last year.

To date we have made great strides with Zevalin, which have translated into first quarter sales of $6.5 million, a 27% increase sequentially over the fourth quarter of 2009. First, about eight months ago in September last year, we received FDA approval for its use in treating non-Hodgkins lymphoma in the first line setting and this approval from the FDA was based on impressive results in a large safety and efficacy study called the FIT trial. Second, the CMS granted average sales price of the reimbursement methodology in the hospital outpatient setting, which went into effect on January 1 of this year. Third, Zevalin received a category 1 classification, the highest recommendation available in the NCCN guidelines which is used by the centers for Medicare and Medicaid services as a source of information to determine which drugs may be covered under Medicare Part B. Category 1 classification is given to drugs with clear evidence of safety and efficacy. Finally, we established a 70 member commercial organization which includes 48 field force personnel that have an average of more than ten years of experience in selling complex anticancer drugs. We are encourage by these results as we believe that they demonstrate that we are on track to achieve real and sustainable growth for the Zevalin brand.

We are seeing increasing interest in Zevalin. We are currently working on delivering certain key goals for Zevalin before we are in a position to fully realize its potential. The goals include updating consistent reimbursement for community base clinics and removal of the bioscan requirement. We are happy to report that progress is being made on both of these fronts. Removal of the bioscan has the potential to simplify the treatment process for both the physician and patient and it will reduce cost for Zevalin administration thanks to the following. Number one, patients would not need to travel to sometimes a remote tertiary care centers to receive the diagnostic radiopharmaceutical, called Indium-111, and the bioscan. Second, it would reduce or eliminate the coordination between the referring hematologist, oncologist and the administering physician who is the nuclear medical physician or a radiation oncologists. And third, it will reduce the cost as well to the healthcare system and patients by thousands of dollars per administration. Today Zevalin treatment requires a seven to ten day time period. However, elimination of the bioscan would enable patients to be treated within a ten minute intravenous injection, which is faster than many other chemotherapeutic agents.

For our second marketed product Fusilev, we are generating the data requested by the FDA that we expect to submit before the end of this year. We expect the FDA to review the application in 2011 and we continue to build the opportunity in colorectal cancer as the growth driver for Fusilev sales, a market that is substantially larger than its currently approved indications. Outside the United States, greater than 95% of sales of Fusilev are in colorectal cancer. Currently the focus of our sales team is entirely on Zevalin. We plan to promote Fusilev once we receive FDA approval for its use in colorectal cancer sometime next year.

EOquin remains a key focal point of our development program. In order to exploit the full potential of EOquin and potentially expand the market opportunity several fold, we expect to initiate a multiple installation trial in patients with high risk non-invasive bladder cancer before the end of this year. This protocol is currently pending regulatory decisions. We expect to see top line data from the two recently enrolled pivotal registration of Phase III bladder cancer trials, which involved more than 1,600 patients in the first quarter of 2012 with the goal of submitting an NDA shortly thereafter.

Finally, we are pleased with the most recent addition to our oncology pipeline belinostat, a late stage novel HDAC inhibitor, for which we obtained rights to all indications in North America and some other countries. As you recall, belinostat's initial target indication PTCL, or peripheral T-cell lymphoma, has received orphan drug designation and foster designation from the FDA. In addition, the licensing of belinostat is an excellent strategic fit since our sales representatives would target the same oncologists that prescribe Zevalin.

Belinostat is currently in a registration trial for PTCL under a special protocol assessment from the FDA. Patient accrual in the trial is going well and we expect to file a new drug application next year. Belinostat is also being studied in solid tumor indications including carcinoma of unknown primary, or CUP. New drugs have been approved for CUP, although the NCI estimates about 2% to 4% of all cancers fall into this category. And it accounts for approximately 10% of cancer deaths. Before the end of this year, we expect completion of enrollment in a Phase II trial for CUP that is being conducted and fully funded by our partner TopoTarget. In addition, the National Cancer Institute is also conducting several studies, both in solid tumors and hematological malignancies.

We believe belinostat offers a differentiated risk benefit profile as compared to other HDAC inhibitors due to its favorable safety profile with little or no born metatoxicity, or mucositis, observed to date in more than 700 patients who have been treated with it in several indications and regimens. To date most of these data have not been published. We are currently working with our partner TopoTarget to put together a comprehensive publication program for belinostat. As a start, four abstracts will be available at ASCO in a few weeks.

In summary, here is what we expect to accomplish in 2010 and beyond. For Zevalin, we plan to continue to grow the Zevalin brand, which was recently approved in the first line setting for non-Hodgkins lymphoma. As you know, Zevalin is currently approved for treatment of patients with previously untreated follicular non-Hodgkins lymphoma who achieve a partial or complete response to first line chemotherapy, and for treatment with patients with the last of the refractory low grade, or follicular B cell non-Hodgkins lymphoma. We also plan to submit to the FDA to enable the removal of the bioscan requirement prior to Zevalin administration. And we plan to pursue consistent reimbursement of Zevalin for community based clinics.

For Fusilev, we plan to submit requested Fusilev data in colorectal cancer indication to the FDA before the end of this year. For apaziquone and EOquin, we expect top line data from the two recently enrolled pivotal registrational trials involving more than 700 -- 1,600 patients to be available in early 2012 with the goal of submitting an NDA shortly thereafter. And in addition with Allergan, initiate a multiple installation trial in high risk bladder cancer by year end 2010. This protocol is currently pending regulatory discussions. Allergan will pay 65% of the costs associated with these trials. With regard to our fourth or the last drug, belinostat, in peripheral T-cell lymphoma, the trial currently underway requiring 100 evaluated patients is on track and on target to file new drug application to the FDA in 2011. With regard to carcinoma of unknown primary, or CUP trial, the target is to complete enrollment by year end in the ongoing Phase II trial, which is being fully conducted and supported by our partner TopoTarget. Other tumor types, we plan to follow closely trials being conducted by National Cancer Institute and initiate additional trials and indications such as nonsmall cell lung cancer.

The first quarter of this year was full of activity and excitement at Spectrum. We expect further success and accomplishments for the rest of 2010. We believe that the combination of our novel product portfolio, business development strategies and fiscal discipline will allow us to realize the full commercial opportunities for Zevalin, Fusilev, EOquin and belinostat. I will now open the call to questions.

(Operator Instructions) Our first question comes from Ren Benjamin of Rodman & Renshaw. Please go ahead.

Hi. Good afternoon and thanks for taking the questions and congratulations on a really great quarter and with turning Zevalin sales around. I have a couple of quick questions. Maybe just starting off with Zevalin. Can you talk to us a little bit about the drive to organic growth. Is it primarily still from the salvage setting or are the sales a nice even mix between sort of the front line and salvage setting? Any sort of clues that you can give us as to what is the mixture of the sales that are coming for Zevalin.

Ren, thank you very much for asking. Good question. As you know that we have started selling this drug only recently for first line indication. From the interest that is being generated in the field, we believe that quite a large number of sales are coming from our first line usage. The exact percentage, we will be able to give you in third quarter, but right now I'm not in a position to give you an exact breakdown as to how many sales are coming from the older indication like salvage therapy and the newer indication of the first line therapy.

Okay. And I notice that the Zevalin sales met our expectations of what we are predicting. Can you give us a sense as to what sort of the demand is out there? Is there an even greater demand out there than what we had predicted, but somehow is not able to materialize in the quarter?

Well, the hematologist and oncologist community are data driven folks and clearly Zevalin has the best program survival in NHL. So therefore there is a lot of interest. Our people, sales people are reporting to us on a daily basis that when they go to visit hospitals, there is tremendous interest in the [research] being conducted by hospitals on their own because of first line indication and usage. So clearly there's traction, and keep in mind that relaunching a drug is even harder than launching a product. This is a drug that for seven years has been doubted as a salvage therapy drug and, therefore, it will take time before people start using this drug in first line setting, but clear there's a lot of interest in this indication for first line use.

Okay. You mentioned that we are on track to -- in seeking the reimbursement in the community setting. Can you give us a sense as to the timing of that, when that might be or what more of the work needs to be done in order to secure that?

We don't like to comment when government will make a decision about reimbursement and community setting, but typically what we have seen is there is a six to nine month lag period between the approval by the CMS and hospital setting and the community setting. We have lined up all the ducks in the row. We have done all that needs to be done. All that we are doing right now is waiting for the government to make a decision. I'm hoping this will happen before the end of this year or sooner.

The same sort of question for the bioscan requirement. Can you just remind me again as to maybe in general terms, what is required for the removal of the bioscan? I know they don't require the bioscan in Europe. What more needs to be done or what more do you need to do to convince the agency that that should be the case here?

We have had two meetings with the FDA and we have a clear guideline about what kind of data is needed for removing bioscan. And you are right, the FIT study that was the basis for approval of the first use of Zevalin. More than 70% of the patients in the FIT trial did not undergo bioscan, and you are right, in Europe most of the patients do not undergo bioscan. So therefore, the data that we are now putting together at this time is to look at the patients who went through bioscan, what kind of side effects they had with Zevalin treatment and patients who did not go through bioscan what kind of side effects they had. And we are right now putting all this data together and we are hoping to submit it this year.

Will you required another meeting with the FDA by chance before this submission or will the next event really just be the submission of this data?

Our plan is to submit the data. I think we have very clear guidelines from the FDA. They've been summarized and we know exactly what they are looking for and we plan to submit this data in the next several months.

Switching gears very quickly Fusilev, you had mentioned that you will actively start promoting Fusilev again upon the CRC approval, but we did note that Fusilev revenues actually picked up for the first quarter to I think it was about $600,000 or so from the previous quarter. Do you have any sense as to what caused even that slight resurgence of Fusilev orders? Does anyone from the sales force provided any feedback as to what may have caused that and could we expect that going forward?

George, any comment?

Currently we have no comments to that, but we will provide some guidance by end of year.

Ren, I think the main thing is that indeed we are not promoting. So this kind of demand press comes from hospitals. We are happy with the sales that we have. Clearly we are not promoting this activity.

Okay. And I guess switching gears quickly to EOquin, can you give us a status on what the partners in Japan and Korea are doing and what are their plans for initiating trial?

So Nippon Kayaku and Handok, we have met with the regulatory targets in Japan. Korea is easy. Korea is just going to follow what the United States does and Japan does. In Korea they have to do more like a marketing trial rather than a regular trial. However in Japan they would need a regulatory study for approval and then the study is right now being discussed between the Hippon partner and the health authorities in Japan, whom we have met already once and we have a pretty good idea as to what kind of a study is needed for Japan.

These studies for both Korea and Japan are expected to start this year?

I don't want to comment upon what the Nippon Kayaku and Handok exactly when they plan to start, but my expectation is they plan to start this year. Still discussing with the regulatory partners.

Final question on belinostat, I think you had mentioned that you hope to file an NDA in 2011. Of course that is quite a wide window, if I can try to pin you down, are we still expecting or on track for some top line data from the PTCL trial by the end of 2010?

2010 we expect data on the CUP trial, which is a Phase II trial, and that trial we are expecting data before the end of this year from our partner TopoTarget and we are working closely with them. The PTCL trial data will not be available in 2010. I expect that data to be available sometime in 2011.

Okay. Terrific. Thank you very much. Congratulation and good luck.

Thank you, Ren.

Our next question comes from Shiv Kapoor, Morgan Joseph. Please go ahead.

Thank you so much for taking my question and congratulations on the success on Zevalin. You've obviously made a dramatic difference there compared to historical, but I wanted to ask you first on Zevalin. Do you think the pace that you have, it's a slow pace of growth quarter-over-quarter, but do you think that kind of slow pace is sort of sustainable at these levels moving forward?

Shiv, thank you for your question. Well, I'm expecting faster growth. It's kind of momentum. So this is a drug that sales have been going down until we acquired it. We had made a commitment that 2009 would be a time to slow the decline of the sales and 2010 will be a first year where we start -- where we expect sales growth to come. So we are actually quite pleased with the sales growth that we are seeing right now.

The pace is slower than I would like to see it, but that's the reality of life and the kind of problems we are facing are the same. When our sales people call some of these doctors, they say yes, I know Zevalin very well. It is for second line therapy. When all else fails I would use Zevalin. I know the drug. Zevalin is a very good drug. So we hear some very good comments, but then it takes time for people to understand that there's new data. There's a new date in the life of Zevalin and in fact it has the best PFS. We tell people and they start converting, but the rate of conversion will be slow. That is just reality. The relaunching of a drug is harder and the growth rates are generally slower than you would expect. So I'm hoping that this pace is sustainable to answer your question directly, and I'm hoping it will pick up over the next several quarters.

That's fantastic. On Fusilev, do you think you have some clear guidelines from the FDA on what you needed for the CRC approval and how confident you are that you will have the data that they wanted by the end of the year?

Yes. To answer to your question, it's absolutely. FDA gave us very clear guidelines as to what kind of data we need to submit to them for getting CRC approval, colorectal cancer approval, and clearly the good thing is they did not ask for any efficacy data to submitted to the FDA, any human efficacy data is not required to be submitted. That is very good news. It can take you years and cost you multimillion dollars to generate that data if you are successful. So the kind of study that they want us to submit, we have a very clear idea and our target is to submit by the end of third quarter. We will definitely submit before the end of this year.

Okay. Moving on to EOquin, looks like there are a lot trials that would need to be started next year. How expensive are these trials compared to the ongoing trials, so we have some sense as to what are the expenses that we expect them to rise to what levels next year.

So the trial actually proposed is only one major trial, which is in multiple dosing. So currently the trial at 1,600 patient trial in SPA is a single dose administration, just like Zevalin. EOquin is to be administered single dose after a TUR, after [transferring of the sections] of superficial bladder cancer.

However, there is a significant patient population of superficial bladder cancer where they require multiple installations, up to six installations. And mind you -- let me remind you that the Phase II study that we have done with EOquin apaziquone, that we had treated these patients for six installations that were given over several weeks. And clearly we found over 67% complete responses. So this study is designed. If successful, we could have several fold increase in sales. This is not administration of trial. This is a trial that would help bring sales, additional sales and target additional patient population. On SPA, it does not affect our SPA, it did not affect our timeline filing a new application and for approval process of apaziquone. This is being done purely to help reach out the patient population that are not covered by the SPA -- additional patients of superficial cancer.

Okay. That's very helpful. And lastly on belinostat, you mentioned some top line data from the CUP trial. Can you tell us more about what your expectations are for possible registration in that indication given the need there?

So let me just share that our primary registration strategy that in 2011, next year, we plan to file as expeditiously as possible registration application for belinostat in PTCL indication. That is our primary goal and primary target. However, knowing the importance of the size of the CUP indication, this is unchartered territory. Keep in mind this note has never been approved. So we have discussions with the FDA. This is a new and emerging area where the focus is being made about cause of unknown primary origin at ASCO and other places where you find more and more discussion taking place on this disease entity.

So I would say this is an emerging area. I'm not able to tell you when we file the NDA. It would depend what kind of data we achieve, what kind of responses we achieve with belinostat in this trial, which we will know by the end of this year. At that time, my plan is to take the Phase II data at that time from the belinostat trial, sit with the FDA and experts who are experts in CUP area, cause of unknown primary area, and then discuss regulatory registration strategy.

Fantastic. Thanks for answering my questions and congratulations again.

Thank you, Shiv.

Our next question comes from George Zavoico of McNicoll, Lewis & Vlak. Please go ahead.

Hi, Raj, hi everyone. Congratulations on a good quarter. That is George Zavoico but that's okay. Not everybody gets it right. I have a couple of quick questions. Regarding the selling, general and administrative expenses, you've ramped up on your Zevalin sales force and sales effort and yet your SG&A went down a bit. Can you discuss a little bit about what you're projecting for SG&A in the coming quarters and whether you'll grow the expense or try to keep it at that level?

George, thank you for your question. I'll have Shayam answer this question.

George, I'm not sure what you are referring to in terms of the SG&A going down compared to last year. It did go up about $4.5 million. But to answer the second part of your question, the $10.8 million I do believe is representative of the rest of the year.

Okay. Very well. And then with regard to the sales force of 48 field representatives, are you covering all of US now? Do you have any areas that still need to be filled in or do you have the whole country covered?

George, this is George too.

Hi George.

But to answer your question, yes, that is 48 sales people that cover the whole US and on top of the 48, we also have a group of commercial support group account managers and senior nuclear oncology specialists and I think we have deployed sufficient force to cover all the needs for Zevalin. And also we also have a group of medical science liaison personnels who would be then reaching out to the medical oncologists in terms of investigator supported clinical studies and request for additional medical information.

Okay. Thank you. With regard to Fusilev, there's no new efficacy data required. Do you actually need to go back into humans to get some safety data. I'm just wondering why it going to take several more months before all the data is collected. Is this from existing safety data or do you have to generate some new safety data?

No. We are not required to submit any human safety data at all. What we are required to submit is some preclinical study and some healthy volunteer study, which we are right now working on.

Okay. That explains a lot. Thank you very much and again congratulations on continuing the sales growth. That's great. Thanks.

Our next question comes from David Gomach of Financial America. Please go ahead.

Yes. Good morning, gentlemen and congratulations on your progress to date. I know you made in passing on Fusilev colorectal data that has to be submitted. You originally said you thought you would have it submitted in the third quarter and I know you did comment in passing, but I missed exactly what you said. Do you still think there's a possibility of getting it in by the end of the third quarter rather than year end?

Yes, David. Our internal target is to complete and submit by the end of third quarter. But we have tried to build the reputation of Spectrum that we under promise and over deliver. So anytime I see that the data is reaching September 30, I get nervous about it and I say we will do it by the end of the year, but our internal goal remains Q3. But our publicly stated number is that we will definitely submit by year end.

I appreciate that clarification.

Thank you.

I'm showing no further questions at this time, gentlemen.

Well, in closing, I would like to thank for your time today. I would also like to state, once again, that your company, Spectrum Pharmaceuticals, is a diversified oncology focused company now on a solid foundation with at least four exciting drugs. Two of these are on the market, FDA approved, proprietary drugs and two are in late stage development. We at Spectrum commit ourselves daily to enhancing cancer care and help cancer patients. Thank you very much for your time and your support.

Ladies and gentlemen, that does conclude today's conference. You may now disconnect and have a wonderful day.