Spectrum Pharmaceuticals Inc (SPPI) 2011 Q1 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Spectrum Pharmaceuticals first quarter fiscal year 2011 financial results conference call. At this time, all participants are in a listen-only mode. Later, we will host a question-and-answer session, and instructions will follow at that time. (Operator Instructions). As a reminder, this conference is being recorded.

I would now like to turn the call over to today's host, Mr. Paul Arndt. Mr. Arndt, you may begin your conference.

Thank you, Ben.

Good morning, and thank you for joining us today for Spectrum Pharmaceuticals' first quarter 2011 financial results conference call. I am Paul Arndt, Senior Manager of Investor Relations for Spectrum Pharmaceuticals. With me today are Dr. Raj Shrotriya, Chairman, CEO, and President; Brett Scott, Acting Chief Financial Officer; Dr. George Tidmarsh, our Chief Scientific Officer; Jim Shields, our Chief Commercial Officer; and other members of Spectrum Pharmaceuticals' management. Here's a quick outline of today's call. First, Brett will provide a summary of our outstanding first quarter financial performance, followed by Dr. Raj Shrotriya, who will highlight our first quarter, recent accomplishments and update the outlook for 2011 before we open up the call to questions.

Before I hand the call over to Brett, 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 timeline, 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 our 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, Wednesday, May 4, 2011, 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 today's press release, 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 Brett.

Thank you, Paul, and good morning to everyone on the call today.

I would like to highlight the key financial metrics for our operations for the three-month period ended March 31, 2011. All numbers are approximate.

Total revenues for the first quarter were $44 million, a 293% increase over the first quarter of 2010. Product revenues were $41 million or a 469% increase over the first quarter of 2010. Let me break it down for you by product. FUSILEV sales were approximately $35 million, with Zevalin sales being approximately $6 million. Net income was $13 million or $0.25 per basic and $0.23 per diluted share, compared to a loss of $39 million or $0.80 per basic and diluted share in the first quarter of 2010.

Cash, cash equivalents, investments, and accounts receivable were $141 million. This includes $89 million in cash, equivalents, and investments and $52 million in accounts receivable. Total research and development expenses for the first quarter were $6 million, as compared to $37 million in the same period of 2010, which included a one-time licensing fee of $30 million for Belinostat. Selling, general, and administrative expenses were $13 million, compared to $11 million in the same period in 2010. There are approximately 52 million shares of common stock issued and outstanding as of March 31, 2011.

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

Thank you, Brett. Good morning, everyone.

I would like to thank our shareholders for supporting Spectrum over the last eight years and for joining us for today's conference call, where we will discuss various exciting events at the Company. In fact, this is the most exciting time in Spectrum's history. I'm very pleased to report the record revenue and record profit in the first quarter. It is noteworthy that this is our second consecutive profitable quarter. Clearly, Spectrum's now on the road to continued success, with increasing profits and revenues over the last two quarters.

These accomplishments will support further development of our marketed and proprietary drugs that we believe will hold even greater potential. And I'm also pleased that we have no debt and that we have no need to raise any capital for running day-to-day operations at Spectrum. In the past 10 days, we have received two FDA approvals, a remarkable outcome indeed. First, an approval for ready-to-use formulation, followed by an approval for colorectal cancer indications for FUSILEV. These are major inflection points in the history of Spectrum.

It is worthwhile to look back and recap our journey. Having started with modest beginnings in late 2002, with Spectrum's market capital of less than $2 million, with mounting debt and negative working capital, over the past eight years, we have been successful in laying a solid foundation for the long-term sustainable success of Spectrum, and we are now reaping the benefits. I'm excited about the progress that Spectrum continues to make on various fronts.

All of our activities are designed to do three things. One, first and foremost, help cancer patients by bringing novel drugs to them as quickly as possible. Second, increase shareholder value. And third, ensure that our business partners and employees have a rewarding experience. As you know, Spectrum has been ranked as one of the fastest growing companies nationwide in the Deloitte Technology Fast 500 for two years in a row. We have also twice been judged as one of the best places to work.

And at Spectrum, we have multiple value drivers. Our risk-mitigating strategy of having a diversified portfolio has proven to be successful. We have multiple sources of growing revenue from selling not one, but two marketed proprietary anti-cancer drugs. Spectrum is now well capitalized. We have a strong balance sheet and a strong fiscal discipline. Our cash needs for running operations are modest, and we can adjust them as the situation merits.

In addition, we have multiple alliances with [pharmaceutical] companies. Some even contribute financially to our R&D activities. We plan to file two new drug applications with the FDA next year. One of those drugs, if approved, could be on the market next year in 2012, and the other in 2013.

I would now like to talk about FUSILEV. We are excited about FDA approval in colorectal cancer, which we received Friday evening around 8.20 PM, Eastern time. This new major indication, I believe, is a long-term growth driver for FUSILEV and is therefore an important growth driver for Spectrum's profitability. The colorectal cancer market in the United States is large, with approximately 140,000 new cases per year. According to the American Cancer Society, colorectal cancer is the third most commonly diagnosed cancer. It is the third leading cause of death in both men and women, with approximately 50,000 deaths expected in 2011. Simply put, colorectal cancer is, without a doubt, a terrible disease, with roughly 400 patients newly diagnosed every single day.

And I would remind you that FUSILEV, sold under various trade names, is already an accessible drug in Europe and Japan, where it faces no shortage of levoleucovorin and has robust generic competition with many suppliers. Ex US sales of FUSILEV by Pfizer, Sanofi-Aventis, and [Targeta] are reported to be in excess of $180 million annually. We believe that Spectrum should eventually be able to achieve or exceed this number, perhaps generating $200 million or more in annual revenue. It is also important to note that FUSILEV has a strong patent protection in the United States. Now that we have gained FDA approval in colorectal cancer, we are able to promote FUSILEV to clinicians and health care providers across the United States.

We were fully prepared for this approval. Our entire commercial team has been trained for this launch and on Monday, May 2, began promoting FUSILEV. All of our launch activities are currently being executed. Because of the tremendous usage of FUSILEV over the past six months or so, even before colorectal cancer approval, we have achieved a level of mind share and awareness among physicians that will serve as an ongoing catalyst for FUSILEV sales.

Over the past several months, FDA, American Society of Clinical Oncology, or ASCO, and NCCN, or the National Comprehensive Cancer Network, have been referencing and recommending the use of FUSILEV. For example, ASCO sent multiple notifications to their entire membership alerting them to the value and availability of FUSILEV. This has resulted in a strong brand recognition for FUSILEV and Spectrum among many clinicians. We anticipate rapid acceptance of FUSILEV and quick adoption of the FUSILEV brand.

Due to an increase in demand that manifested in the second half of last year and in preparation for last Friday's colorectal cancer approval, we worked diligently to ramp up FUSILEV supplies. Patients needs have always been foremost on our minds. We work passionately day and night to solve this problem in cooperation with FDA. Working closely with the FDA and with our vast network of connections, we were able to mobilize and achieve what many considered impossible. In early February, we received product from Europe that we were able to label and supply to patients, helping mitigate further inadequate treatment of colorectal cancer patients. In addition, we have expanded our manufacturing capabilities to include several new sites. I'm pleased to say today that with all of the efforts we have made to expand FUSILEV's availability, I believe the limitations on FUSILEV supply will soon be behind us. In a nutshell, FUSILEV is a very important drug for both patients and Spectrum.

Now, allow me to talk about our second revenue-generating drug, Zevalin. First quarter sales have historically been lower than subsequent quarters, and there are a number of factors, including the impact of patient insurance co-pays resetting on January 1. This is particularly important for a drug like Zevalin, which is a one-dose treatment, as compared to other therapies where the co-pay is being spread over time. I'm pleased to report that second quarter sales are off to a great start, as expected. We expect April sales to be approximately $3 million. We believe that annual sales will continue to grow gradually and will be further bolstered when other barriers, including the bioscan requirement, are removed. The PDUFA date for the bioscan removal is November 20 of this year.

We are partnering with various patient advocacy groups, notably, the Lymphoma Research Foundation, field leaders, advisory boards, and the speaker programs to educate the community on Zevalin. This last month, we conducted an advisory board meeting involving more than 50 experts in the field of non-Hodgkin's lymphoma. Excitement over Zevalin is building among many of these experts. According to Professor Hagenbeek, the author of the FIT study update at ASH 2010, Zevalin is the most effective single agent of the treatment of follicular non-Hodgkin's lymphoma with acceptable hematological toxicity. To me as a physician, this means a lot.

We have also embarked on developing Zevalin for additional indications, such as aggressive lymphoma, where it has already demonstrated activity. Building on its strong showing at ASH 2010, Zevalin will hold a prominent position at two major conferences this year, Lugano Lymphoma Conference and the Pan Pacific Lymphoma Conference. We are confident that if bioscan requirement is removed and some of the other strategic initiatives that we have undertaken come to fruition, annual Zevalin sales could exceed $100 million, assuming a continued increase in penetration, to just 5% of indolent non-Hodgkin's lymphoma market, we could achieve sales in excess of three million -- $300 million annually. Remember, Zevalin is a very effective drug that is given as a single dose with a profound clinical and pharmaco-economic value proposition for indolent lymphoma patients and treating physicians.

We believe we have laid a solid foundation for Zevalin growth. When we acquired Zevalin in early 2009, annual sales were in double-digit decline, year after year. However, since then, sales of Zevalin have grown nearly three-fold. In 2010, our year-over-year growth was 84%, delivering the highest annual revenue in the history of this brand since it was approved by the FDA in 2002. We remain confident in our ability to sustain growth of Zevalin.

Let me briefly talk about our other later stage programs. With regard to our later stage (inaudible) products, filing of new drug applications for Apaziquone and Belinostat continue to be our highest priority. For Apaziquone, the final clinical evaluations will occur in December of this year, which will allow us to lock the database, analyze the database, and assuming positive results, we expect to file an NDA in 2012, this next year. With regard to Belinostat, a novel HDAC inhibitor, we continue to enroll patients at more than 100 sites. We expect to complete enrollment in 2011 and file an NDA in 2012, again, next year. We believe the market opportunity for Apaziquone and Belinostat are very significant, likely even greater than for FUSILEV and Zevalin, which provide these revenues to help fund their development.

Here's what you can expect us to achieve over the next 12 to 24 months. With regard to FUSILEV, we expect to continue to grow revenue. We plan to initiate additional clinical doctoral studies to expand FUSILEV's use in modern-day regimens in colorectal cancer . With regard to Zevalin, we are initiating a study in aggressive lymphoma. We expect bioscan's removal, for which PDUFA date has already been given as November 20 of this year. For Belinostat, we expect enrollment completion in this year and then filing NDA next year, and again, Apaziquone's NDA is also to be filed next year.

Before I open the call for questions, I would like to recap some of the key sector drivers at Spectrum that I believe are unique. We now have had two consecutive quarters of profitability. We believe that our business strategy comprises multiple sources of revenue, which strategically aligns us, and a robust diversified pipeline has been validated. Furthermore, our ability to respond to challenging market developments has been demonstrated. Importantly, we believe that our recent FDA approvals have positioned us to achieve sustainable revenue and profitable growth.

The approval -- ability to manage a diversified, balanced portfolio of commercial marketed drugs and later-stage development programs. However, it is imperative to understand that Spectrum has proven its ability to acquire, incubate, and develop drugs across multiple phases of development. We believe there are other gems in our portfolio that will continue to build significant value over time. At this point, I can confidently say that Spectrum has never been a stronger Company, and the future has never been brighter. I would like to emphasize once again that at this time, we do not need to raise capital for day-to-day operations. Please stay tuned; there's more to come.

We will now open up the call to questions.

Thank you. (Operator Instructions). And our first question comes from Jason Kantor of RBC Capital Markets.

Hi, guys, and congratulations on good numbers.

I guess, a couple of questions. Could you talk about the new formulation, the ready-to-use FUSILEV, and how you think that impacts sales, especially in this new colorectal cancer indication? And also, if you could comment on your accounts receivable, I understand with the bolus of sales, you would expect that number to be going higher, but it seems that maybe you still haven't been paid for some of the product you shipped in Q4. So maybe you can explain how that number's gotten as big as it has.

Jason, thank you for your questions.

So let me talk about our ready-to-use formulation before I ask Dr. George Tidmarsh to comment. Just to give you an idea, a (inaudible) products, FUSILEV has been available until now as a (inaudible) products. It takes a long time to make a (inaudible) product, and the limitation is, each batch can only reproduce about 10,000 to 30,000 vials, for example. And the shortage that this caused last year, we were running around trying to make FUSILEV all over the place. However, we knew that when the drug is approved for colorectal cancer indication, 50-milligram vials will not be adequate. In fact, we needed a larger vial size, so ready-to-use formulation is now approved in a 175-milligram size per vial. That's number one.

And as the name indicates, ready-to-use vial, this is ready to use. In other words, a (inaudible) vial has to be -- you have to inject (inaudible) injection and then shake it and leave it on the table for some time before it can be given to patient. A ready-to-use formulation can be produced in gallons, and the vials can be filled online without having to wait for several days before the other vials, (inaudible) vials can be converted into a dry powder.

So with this, I would like to ask George to comment upon the two.

Yes, Raj, thank you, and I think you've summarized it nicely. I would emphasize the increase in vial strength, 175 and 250, so instead of having to open up eight vials for a typical patient, it's now two. That's a significant advantage of this site. Not having to dissolve the powder and wait and so forth also is a significant advantage. And then there's manufacturing advantages. Just the process is much simpler. You don't need a liotholizer, a special machine, and then that opens up many different manufacturing sites for us, because not every contract manufacturer has a liotholizer. So there's multiple advantages from the strength, the presentation of the product, and the manufacturing site -- the ease of manufacturing and the manufacturing site diversity.

Thank you.

The second question was about the large receivable that we have. Keep in mind that, as I said in my prepared remarks, that the -- that we were able to make most of the sales in February and March -- in fact, end of February and March. And of our -- people who buy this drug from us, they have 60 to 75 days in making payment. And therefore, clearly some payment did come in last quarter, but we expect more payments will be coming in this quarter. So that's why you find that there's a large accounts receivable.

Right, but the accounts receivable is greater than your total quarterly sales for this quarter, right? So that means there must be some still accounts receivable from previous quarters, is that right?

Let me ask Brett to comment on this.

Yes, I think, Jason, where the disconnect is, the accounts receivable is going to be higher than the sales, which is a net sales number. That sales number is net of expected rebates, chargebacks, etcetera. So as Dr. Raj just mentioned, the majority of sales in this quarter took place towards the end of the quarter. Those receivables were generated February, March, and will be collected in Q2.

Great, thanks.

Thanks, Jason.

Thank you. And our next question comes from Joe -- from ROTH Capital.

Congratulations as well.

Raj, first, maybe now that you have a FUSILEV approval in hand --or both approvals, I should say -- can you give a sense now what some of the initial steps you're going to undertake with regard to launch, and what will be some of the marketing points your sales force will be using? And then the second half of the FUSILEV question is, can you comment additionally as to what kind of additional studies you might have planned?

Let me -- before I ask Rick Gonzalez, our Vice President of Marketing, let me try to give you my perspective on launch. This is a very easy launch for Rick Gonzalez. I have to tell you, that because of the familiarity with the drug, the drug has been now used for colorectal cancer patients for the last six months (inaudible). There's a tremendous awareness about the drug, the healthcare providers are already using the drug. They know that this is used -- to be used in a different dosage than what they are used to using before. So (inaudible) familiarity, as we said in my prepared remarks, that the entire ASCO membership were sending e-mails -- were receiving e-mails from the ASCO leadership, that if you want to use, you can use FUSILEV, and this is the number to call, call Spectrum on this hotline. So we've already got sort of mileage or pre-marketing because of the availability of FUSILEV during the last six to nine months.

But I would ask Rick to comment with some more specifics.

Thanks, Dr. Raj.

Again, this is Rick Gonzalez, Vice President of Business Solutions and Government Affairs. We have three major points of communication at this point. First and foremost is the approval in colorectal cancer. Number two is the readily and sustainable availability of (inaudible). And the third one is adequate reimbursement environment. And all these three things put together with the pre-market conditioning that was enabled by the existing generic leucovorin shortage and usage of FUSILEV will have set the stage for a very, very successful launch. Some of those activities include, and are limited to, though, to the distribution channels being in full steam performance and full availability of supplies, mass communication to not only patients but pharmacists, oncology nurses, patient groups, that has been already put in play as of Monday, and the last, but not least, is the patient education piece. There's a tremendous amount of need for this product, as Dr. Raj alluded to in his remarks. So all these things combined, market awareness for the availability and the approval and the adequate reimbursement for FUSILEV, will definitely ensure a successful launch.

Thanks for that.

With regard to additional studies, George, do you want to comment on that?

Yes, thank you. Most importantly, what we would like to do from a clinical development standpoint is launch a study or studies which support further use of Zevalin for colorectal cancer patients. One of the -- excuse me, FUSILEV.

And one of the most critical unanswered questions with FUSILEV is, do we have exactly the right dose? Is 200 milligrams per meter squared the right dose? There was a pilot study by Shytower published in JCO earlier suggesting that if you use equal milligram amounts of leucovorin versus FUSILEV, you actually get better results with FUSILEV, that is, lower toxicity and a trend towards better efficacy. We would like to launch a formal study comparing equal milligram doses of leucovorin and FUSILEV -- that is, 400 milligrams per meter squared of both -- and we believe that we can show both a safety and efficacy advantage in such a study. The ultimate advantage of that, of course, is we would then -- if what we expect comes to fruition, then patients would be dosed with twice the current dose of FUSILEV, which obviously then would translate into much higher sales.

Okay, great. Thanks a lot, guys.

Thanks, Joe.

Thank you. And our next question comes from George Zavoico of McNicoll, Lewis & Vlak.

Hi, everyone. Congratulations on a tremendous quarter.

I just wanted to follow up, first of all, on Joe's question regarding additional studies. I noticed in the product label, it says that FUSILEV is approved for metastatic advanced colorectal cancer. Now, leucovorin, if I understand correctly, is used also -- not only in second or third line, but also first line. Are you looking to expand into earlier stage patients?

George Tidmarsh here. The reason that the indication in the label is what it is, is that we wanted that to -- typically with our orphan drug protection. So, orphan drug protection is specific to a compound and an indication. And so part of our negotiation with FDA was to ensure that our indication was exactly what our orphan drug status was so that we could be afforded that additional protection. We believe that that was more important than to cover broader stages of colorectal cancer, because we believe that once approved in colorectal cancer, there will be reimbursement for adjuvant, as well as localized disease therapy. So we felt that the indication need not be broader. It was more important to fit the orphan drug.

Okay. That makes sense.

And then could you go over the patent protection, where does this stand now?

The current patent is in force until the end of 2019. It's deemed to be a strong patent, we feel, defensible by any potential generic challenge. And also important to recognize that orphan drugs will last until 2018. So you are really looking at an additional 18 months of patent, and therefore, it would be very unlikely that any generic would try to launch at risk into the face of that, you know, seemingly short period of extended patent protection.

Yes, sure. Looking at it that way, it seems like a very good strategy.

With regard to Zevalin, could you provide, if you can, a little bit more time line on the start of the aggressive lymphoma trial, and in that regard, you're waiting for the bioscan removal, as well, in November. Can you start the trial before that without the bioscan removal, if it's feasible?

Yes, we can. Since that is a new indication and it will be under protocol with special protocol assessment, we will conduct that trial without the bioscan. And certainly, that will be in anticipation of receiving the full labeling change to remove the bioscan. In terms of timing, certainly, we're on track to start that trial by the end of 2011.

Okay, thank you very much. Congratulations again.

Thanks, George.

Thank you. Our next question comes from Shiv Kapoor from Morgan Joseph.

Thanks for taking my questions.

A couple of them. First, on FUSILEV. In your discussions with physicians and hospitals early on, do you think there will be significant switching back to leucovorin when the general form is available, which should be available later this month? And second, on Zevalin, can you describe for us what your clinical development strategy is for Zevalin in newer indications?

Let me try to answer your question about the FUSILEV. So keep in mind that the dosing of FUSILEV is different than leucovorin. What we have learned is it's a nightmare for doctors and healthcare providers to go to the patient level and keep switching dosage. Right now, the FUSILEV has to be given at one-half the dose of leucovorin. So our feeling is that in last six months or so, our survey with the doctors has shown the doctors are very satisfied with FUSILEV. They know that this is a drug that they are comfortable with. They know the dosing, the whole staff knows how to use it.

There have been a number of times in shortage situations with leucovorin, and now that we know that they know that FUSILEV is now approved -- they were comfortable using FUSILEV even when it was not approved in colorectal cancer. Now that it is approved and we have assured, continued supply of FUSILEV, I believe that switching back to leucovorin will happen in some cases, but I do expect that the bulk of the doctors will keep using FUSILEV. And again, my experience comes from not only from our experience selling the drug for about six to nine months for CLT patients, it also comes from Europe and Japan. In Europe and Japan, generic leucovorin is widely available, marketed by many companies, and yet there is almost a 10-fold difference in the usage of -- the sales numbers between levoleucovorin or FUSILEV in Europe and generic leucovorin.

I personally feel pretty good about it, but I will ask our people to add some words to it. Rick?

And to add to Dr. Raj' s comments, we have a commercial team, a commercial strategy to actively promote and protect our market share in time. We fully expect and plan that at some point this generic leucovorin shortage would be over. However, the brand will continue to be promoted and sold into the marketplace, even in the face of that. As Dr. Raj alluded to, even in Europe, these market conditions are a bit different and still, levoleucovorin or FUSILEV under different trade names perform at a very high level. So we expect that to be in the US, and we will commercially -- we will manage that and we are ready to take that on.

With regard to your second question on clinical development, maybe I'll have George, if you would.

So, it's important to recognize that aggressive lymphomas, although also characterized as non-Hodgkin's lymphomas, are a fundamentally different disease than follicular lymphomas. Follicular lymphomas are very indolent, slow growing. Patients can go into remission and relapse and be retreated, and that can occur multiple times over 10 to even 15 years. With aggressive lymphomas, and especially those patients who are at higher risk, it's a bit of a binary outcome. You either get cured up front or you relapse, and there's very few options for salvage therapy. In fact, there's only really one salvage therapy, and that's stem cell transplant. For those patients who aren't eligible for stem cell transplant, there are no medically proven or FDA-approved products available for those patients. Because they die very rapidly and there's nothing available, the best thing to do, especially for those patients at high risk up front of relapse, is to treat them with the most aggressive therapy you can.

And so in addition in aggressive lymphoma, the use of maintenance rituximab after induction of up-front remission has not been shown to provide any additional therapeutic benefit. So you have a substantial number of patients with aggressive lymphoma for whom maintenance rituximab is not a proven benefit, and then upon relapse, have no therapeutic option and die very rapidly. So our plan is to go into those patients, aggressive lymphoma, that have higher risk features and conduct a study that is essentially the same design as the FIT trial. That is, patients get up-front chemotherapy that would be (inaudible) rituximab in this case, and then the randomized -- those patients who respond are randomized to either observation or Zevalin treatment, with the outcome being overall survival.

And that's a key difference between aggressive lymphoma and follicular lymphoma, whereas no study in follicular lymphoma has ever driven to a positive overall survival outcome. In aggressive lymphoma, the timing and magnitude of the effect are such that we can show -- we believe we'll be able to show a difference in overall survival. And really, the key driver there is, once we've shown a difference in overall survival, then any issues with regard to either patient referral or difficulty of administering go away, because that becomes then a standard of care. So we believe that a new registration, as designed in aggressive lymphoma, will not only expand the market, but will also put Zevalin as the standard of care and therefore be unavoidable to be used by oncologists.

Thank you, George.

Thanks.

If I can squeeze one more question in. Since no one has asked this, your year-over-year Zevalin sales are down. I understand the reason for the quarterly decrease, because of the copay power going down in the first quarter of the year. Why is Zevalin down year-over-year, and do you still expect growth year-over-year for the full year?

No. We know the reasons. We have talked about the reasons in the past. Since we have taken over this drug, we have got first line approval for [in consolidation] setting. We have got reimbursement, we have got NCCN recommendation, and now we are trying to remove the bioscan removal. So we believe that the sales will continue.

Our 84% growth rate year after year is, to me, very impressive for a drug that for seven years was considered, taken for dead. The excitement that we are seeing in the marketplace -- in fact, more and more doctors are choosing to be treating themselves with Zevalin in preference over other treatments. I'm getting those reports from various hospitals across the country. So to me, we are very, very excited about Zevalin's potential.

And we believe that this year -- last year, we made $29 million, this year our sales will be higher than what we did last year. And that (inaudible) year after year, until we remove all the barriers to Zevalin. They are very bullish, and they are very excited that we have a drug that is safe and effective and unique, and the single-dose therapy for cancer. How many drugs do we know that are given at a single dose, and the second dose is to be given after four years or five years? We are very excited about Zevalin, and we expect continued increase in their sales.

Thanks.

Thank you. Our next question comes from Ren Benjamin from Rodman & Renshaw.

Hi, good afternoon, guys, and congratulations on the quarter. Thanks for taking the questions.

Can you talk a little bit about the value proposition for FUSILEV. (inaudible) obviously be the marketing that you will be doing. Why will payers, you know, opt to reimburse FUSILEV over generic leucovorin when the shortage is over?

Ren, thank you for your question.

That's a very good question, and that could be asked -- if we didn't have any experience from Japan and Europe, your question would be really hard to answer at this time. I can only talk about the experience we have in the US. Japan and Europe is more even price sensitive, and in fact, in Japan, the sales of FUSILEV levoleucovorins have been growing year after year (inaudible) and there are dozens of companies that continue to market leucovorin. Don't forget, we can't promote and we can't talk about the virtues of FUSILEV, because of the package insert that we have. However, doctors who use this drug, as Dr. Tidmarsh talked to you about the (inaudible) published in JCO that talks about (inaudible) for the FUSILEV. And in fact, on the efficacy, also there is an advantage (inaudible) in the trial, and we believe that in fact, several advantages of FUSILEV that we plan to complete in our studies, ongoing studies, and we are planning to start now, and we will try to establish this drug as an alternated drug for the doctors.

So we are very confident that there is a value proposition of this drug that's already established and confirmed in Europe and Japan, and we have already seen what value propositions we were able to confirm in the last nine months of marketing in the United States. Keep in mind that as compared to Zevalin and FUSILEV, it takes a long time to establish a drug like Zevalin, especially a drug that has been broadly promoted for the last seven years, or ignored, or non-promoted, or didn't have the right label. FUSILEV already had a head start, even before the drug was approved, and having 40 -- $35 million sales in one quarter, over $32 million sales in the entire previous year, we are very bullish and we are very excited about the potential this drug holds.

Can you talk just a little bit about the new studies, how, you know, I guess, you know, how they will be designed, how large will they be, and how long will it take before we see the results of these newer studies?

I just answered your -- before I ask George to answer the question, I'll just comment upon, you asked about the famous question that I did not address. So if you look at the cost of FUSILEV treatment, FUSILEV is given along with feverfew or with other drugs where (inaudible) and what have you. The cost of FUSILEV is even now miniscule as compared to what the doctors, what the doctors or patients have to pay for other drugs. This is in regimen -- mind you, FUSILEV is given in regimen. It helps reduce the toxicity of drugs like (inaudible), and it enhances the safety and efficacy of those drugs. So this drug serves a purpose, and now that the doctors have gotten used to using this drug, to the best of my knowledge, not a single reimbursement has been denied, even when this drug was not approved. So I feel pretty comfortable that going forward, we will be able to establish this drug as the drug of choice in the United States for this approval. And that is our goal, that is our mission, and that's what we plan to do, going forward.

With this, I would like to ask George to talk about the studies.

The basic design is fairly simple. It will be colorectal cancer patients, and we'll stratify based on risk factors and randomize to equal milligram doses of leucovorin versus FUSILEV and then follow first, all of the parameters we've discussed, the safety parameters, as well as the efficacy outcome parameters, such as progression three survival and overall survival. The size of the study is currently under design, but it will be somewhere in between sort of 800 to 1,000 patients at the very largest. It depends upon what the clinical assumptions are, what the assumptions are that we make going into it, because there are many, many of these patients, it can enroll very rapidly. We don't have an exact enrollment time line. When we finalize the design and do the feasibility, we'll share that with you.

But I would anticipate some of the top line results, such as the comparisons of safety, which we know trended, in fact, were statistically significant in favor of FUSILEV, can be read out very rapidly. We don't have to wait the 20 months for the survival end point to report that out. So we anticipate that from start to initial results, a roughly three-year period of time, but we'll update you on that time line as we get closer to launching the study.

Thanks, George.

And George, when do you think that the study will start?

We're targeting for the second half of this year, the end of this year.

Okay.

And just switching gears to Zevalin, I guess I really didn't understand, Raj, what you meant by the impact of the one-time copay and how that affected sales. Could you just, you know, take me through this again, as to why it would have an impact in the first quarter but then shouldn't have a continued impact on the second quarter? Based on the April numbers you quoted, it looks like we would have a fairly quick rebound in Zevalin sales for the second quarter. So maybe I'm not understanding.

I will have Jim Shields, Chief Commercial Officer (inaudible), but I tell you what I understand here. What I understand is that every year at the beginning of the year, when insurance policies are renewed, patients still have to satisfy their deductible. That's number one. And their deductible could be as much as 20%. And if you have a drug that costs $35,000 injectable, $7,000 in one shot. However, if the drug happens to be given over a long period of time, costs $200 or $2,000, $7,000 injectable is $1,400. And also, keep in mind that indolent lymphoma is a disease where 15% to 20% can say wait and watch. So here there is a possibility that patients could -- some of the patients would wait. Therefore, the first quarter sales have been traditionally, historically (inaudible) might have been slow. That's number one. Number two (inaudible). The government rates are a lot cheaper than the other rates, and if the -- and during first quarter, if there happen to be more patients on Medicare, more patients who are on government service, who don't have to worry about their copay and what have you, then the mix changes. So if we sell 100 patients treatment, and if it happens to be the 40% to 50% of government employees, or government is paying, then the revenue to the company is lower.

But I'll let George -- Jim Shields talk about this.

Thanks, Dr. Raj. And there's not much that I can add to what Dr. Raj said.

If we look at the historical trends of this product over the past, there is a one -- there's one consistent nuance that shows up, and that is that Q1 sales are traditionally the lowest. The one constant that would apply across the board historically certainly could be the copay issue. So there may be myriad reasons why Q1 ultimately is lower than the other quarters of the year, but certainly, one thing that we can point to with a fair level of assurance is that the copay issue certainly has to be factored in. Beyond that, you know, like I said, there could be other reasons, but we believe that is one constant that sort of bridges from year to year.

Do you want to add to that? Go ahead, Ren.

Sorry, and I guess just looking at, let's say the sales trends that you're seeing, I understand the first quarter was not what you expected, but if you dig deep into the numbers, can you get a sense as to how much of these are repeat orders from the same practices versus, you know, new marketing initiatives that are expanding and signing up newer accounts?

Rick?

I'll take it. We've done -- good question, Ren. We've begun to do an analysis on that, and it appears that we are -- and it's very encouraging -- we are seeing a number of new accounts ordering Zevalin that had not in the past. So we're very encouraged about that. Relative to the blend or the mix, I'm not in a position to give you an answer to that question, but I can tell you that our strategies are beginning very clearly to take hold. And we are beginning to see orders come out of accounts that we had not, we had not seen before, which we correlate to the fact that we are getting the message, the strong clinical message across to clinicians that, you know, that ultimately result in the patients being treated at different sites.

One thing to keep in mind, the site of administration of Zevalin varies. There are certain restrictions or regulations for sites that administer Zevalin. There are considerations. Yes, to your point, there are repeat orders from the same sites. However, we very well recognize that those patients are being managed by physicians that may not necessarily be in the institution which administers. They are referrals from the community. So we are focusing a tremendous amount of time just promoting and selling the clinical message and the clinical value to that segment, so that when the therapeutic decision is made, it is made in favor of Zevalin.

Okay.

Switching gears real quick to Apaziquone, could you update us to what's happening with the bridging study in Japan? What's the status there? And then, what's the potential timing for the initiation of a Phase II-3 trial in Japan?

So I'll let George talk about this, but let me just give you my 30,000-foot view. Japanese development program has nothing to do with US funding NDA. And Japanese team was here only last month, and George, if you can fill in.

Yes, the program in Japan is moving along very nicely. There's, of course, in Japan a requirement that you initially do pharmacokinetics and repeat basically what you've done in Phase I and other populations, and that is enrolling, and in fact, almost completely enrolled now. Within certainly the next two quarters, they will begin the actual formal bridging study, which is basically just a abbreviated, a much smaller version of the registration trials that we've conducted here in the US. So everything's on track very nicely in Japan and Korea.

Okay, and what's happening with the multiple installation trial in high-risk bladder cancer patients?

We are on track to initiate that trial within the next three months.

Wow, great. That's good to hear.

And I think -- can you -- sorry, just on Belinostat, can you give us a sense as to when the enrollment for the Phase III trial in PTCL will be -- I think it's supposed to be completed in the second half of this year, but maybe I'm wrong.

We're comfortable giving guidance that we will completely enroll the trial this year and file the NDA next year.

Okay, so I mean, would it -- is it assuming too much that we might see top line data by ASH this year?

No, we won't have any -- we won't give top line data at ASH.

Okay. Well, great. Thank you guys very much, and congratulations.

Thanks, Ren.

Thank you. Our next question comes from Difei Yang from Capstone Investments.

Thank you for taking my call, and I have a couple of follow-up questions. First question is relative to Zevalin. I understand the point that Q1 usually has the lowest sales, but if I compare Q1 this year sales versus Q1 last year sales, it is still a decline from -- I guess it is still a decline of roughly $600,000. Could you help me to understand what might be causing that?

So I think -- first of all, thank you for your question.

I think one of the reasons, as I said, was mix of the payers. If there are more government payers involved, lot of private payers, they pay significantly less dollars for patients treated than the private payers. That's a government policy. So that changes on which we have no impact at all, whatsoever. So that's one explanation.

Rick, do you have any other?

Yes, I think with the quarter-over-quarter is one way to look at it. The annual versus annual is another way. And when you look at what we have seen, and Dr. Raj alluded to in the Q2 trajectory, which we expected, we are well on our way to the growth that is expected over the, over annual -- year-over-year. When you look at Q1, the preparation cycle for a patient to be treated with Zevalin fluctuates. So what we see is that not necessarily there's a cutoff in calendar days for a patient to be treated. Some of those can spill over into the following quarter. That's why the year-over-year measurement is a more accurate way to view it versus Q-over-Q.

Okay, thank you.

So switching gears, I was reading 8-K maybe from the Company recently, with regards to employee compensation plan. In that document, there was mentioning of in the case where if there's a transaction happens to the Company, X percent will be paid out to the employee. So could you comment on is that one of the strategic directions that the management is thinking about, or am I reading too much into the document?

I think you are reading too much into the document. Growing -- a fast, rapidly-growing company has a number of strategic things that (inaudible) things periodically under the advice of excellent lawyers and accounting firms and officers and whatnot, and they do certain things that are more strategic in nature, than trying to do something for today or tomorrow.

All right, thank you.

Thank you, Yang.

Thank you. Our next question comes from Jason Kantor from RBC Capital Markets with a follow-up.

Hi, thanks. Thanks for taking the follow-up.

Two questions, I guess, on R&D and SG&A. Given the improvement in colorectal cancer, do you think your sales force is correctly sized, given you have to call on both solid tumor and lymphoma specialists? And then with regard to these trials that you're planning to start with, sound really very interesting, what -- do you have any sense of what that might mean for, say, 2012 expenses, and do you have any kind of parameters where you're trying to keep expenses within a certain range?

So you are talking about the sales force sizing? Jim?

Yes, good question, Jason. Our sales force sizing, we believe is right now is appropriate. We -- as a forward-looking pharmaceutical company, obviously we're always looking for opportunities and justifications, if practical, to grow, and at such a point, and we're monitoring on a routine basis. At such point we see the need to grow our sales force, we certainly will do that. In fact, we're in the process of putting some plans together right now that will have a small impact on the size of our sales force, but we'll continue to monitor this and if we can -- if I can justify -- we will take that approach.

Hello?

Hello?

I'm still here.

Jim, do you want to talk about -- the next question about the 2012 trials?

Yes, certainly there will be an increase in R&D spending, and I think Brett can address those specifics.

Sure. Jason, good question.

We -- I think we're -- we have given some indication in the 10-Q that we filed in terms of where we think the R&D spend will be for this year. Next year, there will be, you know, increased activity, as George just mentioned, and we don't and have not given forward-looking guidance in terms of revenues or spend. So we will manage that and give probably better guidance as we get closer to 2012.

And, Jason, as you know, once these trials begin in the second half of this year, really the major expense will be in 2012 and '13, rather than this year.

Great, thanks.

And by the time we hope the revenues will keep increasing from FUSILEV and Zevalin and we hope next year we'll have Belinostat revenue coming in.

Thank you. That's all the time we have for questions today. I would like to turn the call back over to Dr. Raj Shrotriya for any closing remarks.

In closing, I would like to thank you for your time today and for your continued support of Spectrum Pharmaceuticals. We are committed to delivering results for our shareholders and provide safe and effective treatments for cancer patients, the ultimate benefactors of our passion and efforts. We look forward to reporting continued progress in the coming quarters. Thank you.

Ladies and gentlemen, thank you for attending today's conference. This does conclude the program, and you may all now disconnect. Have a wonderful day.