Spectrum Pharmaceuticals Inc (SPPI) 2011 Q3 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Talon Therapeutics reports third-quarter 2011 financial results. At this time, all participants are in a listen-only mode. Later, we'll conduct a question-and-answer session, and instructions will follow at that time.

(Operator Instructions)

As a reminder, this conference call is being recorded. I would now like to introduce your host for today's conference, Dr. Steven Deitcher, President and CEO.

Welcome to today's Talon Therapeutics investor update call. Today, Craig Carlson, Talon's Senior Vice President and Chief Financial Officer, and I will provide a general corporate and financial update focused on the key accomplishments of the third quarter of 2011, important events occurring shortly after October 31, 2011, and plans for the remainder of the calendar year. Before we get started, I would like to remind everyone that Craig and I will be making forward-looking statements. Please visit our Company website at www.TalonTX.com in order to review our most recent SEC filings and press releases.

The third quarter of 2011 contains several of the most important and transformative Talon accomplishments to date. Our expert and dedicated team of professionals, in conjunction with our esteemed network of clinical investigators and advisors, has advanced our lead product candidate, Marqibo, to within months of a potential FDA approval and US marketing authorization. This, combined with the advancement of the Menadione Topical Lotion program into Phase 2 development, represents significant and efficient pipeline advancement. Let me continue with a more granular description of the accomplishments related to Marqibo over the past three months.

Talon successfully completed and electronically submitted our complete, original new drug application, or NDA, to the FDA seeking accelerated approval for Marqibo in adult patients with advanced, relapsed, and/or refractory, acute lymphoblastic leukemia, or ALL. This population represents an unmet medical need and one where we believe that Marqibo has demonstrated unprecedented single-agent anti-leukemia activity and a favorable benefit-to-risk ratio. Following a customary and critical initial review period, our NDA was accepted for filing by the FDA for review under the Accelerated Approval Pathway known as Subpart H.

Our NDA was granted a 10-month standard review with a PDUFA date of May 13, 2012. An Oncology Drug Advisory Committee, or ODAC, meeting for our application is expected towards the end of the first quarter or early in the second quarter of 2012. Review status and PDUFA date aside, the third quarter of 2011 saw rapid engagement by the FDA, resulting in requests for additional Marqibo clinical raw data, manufacturing site and supplier preapproval inspections, and US high-enrolling clinical site inspections. We welcome this immediate engagement and are further encouraged by the results of all inspections to date. We will continue to cooperate with the FDA as they ensure Talon's preparedness for bringing Marqibo to market.

As we stated during our last investor update call in August of this year, very important -- if not essential -- components of the Accelerated Approval process, described by the FDA oncology leadership during the February 2011 ODAC meeting, involved reaching agreement with the FDA regarding a post-approval Phase 3 confirmatory study and having such an agreed-upon confirmatory study ongoing at the time of approval. Our intention is to meet these expectations. In the third quarter, we achieved the highest degree of FDA agreement for our Phase 3 adult ALL trial, named HALLMARQ, by requesting and receiving a Special Protocol Assessment, or SPA. HALLMARQ stands for halting newly diagnosed adult acute lymphoblastic leukemia with Marqibo containing chemotherapy, and is designed to be a robust, global, randomized comparison of standard vincristine with Marqibo as part of a front-line treatment regimen for adults aged 60 or older with newly diagnosed and untreated ALL. The hypothesis being tested is that the incorporation of Marqibo into front-line therapy will increase remission induction rates, reduce relapse rates, increase overall survival, and all without any exacerbation of treatment toxicity.

HALLMARQ as been activated, is detailed on clinicaltrials.gov, and is currently being opened at up to 20 US expert ALL treatment centers. We target a first patient in, prior to our ODAC meeting. Achievement of this enrollment initiation goal is facilitated by our standard review clock and would have been near impossible in a priority review setting. Activation and management of a global network of clinical sites will be completed with the assistance of a well-known and highly experienced contract research organization, or CRO. In addition to activation of the Phase 3 HALLMARQ trial in patients with newly diagnosed ALL, Talon has announced the activation of a Phase 3 Marqibo trial in patients with newly diagnosed and untreated aggressive non-Hodgkin's lymphoma, called the Optimal Greater Than 60 Study. This randomized trial of our CHOP versus our CHAMP where the O in CHOP represents standard vincristine, and the M in CHAMP represents Marqibo, is being run by the German high-grade lymphoma group, and is expected to commence enrollment by the end of 2011. This trial is very important to our ultimate label expansion plans.

In addition to front-line adult ALL and front-line aggressive lymphoma, Talon is pursuing Marqibo development in children. I am heartened to report that the Phase 1-2 study of Marqibo in children and adolescents with solid tumors and hematological malignancies, including ALL, has initiated enrollment and completed the dosing of the first cohort in the dose escalation part of this National Cancer Institute study. Planning for the Phase 2 and Phase 3 Marqibo trials in pediatric ALL is under way.

Moving onto Menadione Topical Lotion, I am pleased to announce the imminent commencement of enrollment in a multi-center randomized Phase 2 trial of Menadione Topical Lotion for the prevention and palliation of epidermal growth factor receptor inhibitor induced skin toxicities sponsored by the world renowned Mayo Clinic, with investigational drug supply and other support from Talon Therapeutics. This trial is intended to provide definitive proof of concept and guide the design and execution of a subsequent Phase 3 registration development program. This concludes my formal remarks, I will now turn the call over to Craig so that he can discuss the quarterly financial results. Craig?

Thank you, Steven, and thanks again to all of our shareholders and prospective shareholders who are participating in the call. I'm going to start off with a statement of operations for the three months ended September 30, 2011. Total operating expenses for the third quarter 2011 were $3.4 million, compared to $10.3 million for the same period in 2010. R&D accounted for $2.4 million of the quarterly operating expenses of the third quarter 2011, compared to $9 million for the same period in 2010. The primary reason for the decreased operating expenses was a one-time $5.75 million payment as part of a renegotiation of the Marqibo licensing agreement during the quarter ended September 30, 2010.

Talon had a net loss of $706,000 and deemed dividends on preferred stock of $1 million which, when combined, resulted in a net loss applicable to common stockholders of $1.7 million, or $0.08 per share. In contrast, the net loss during the three months ended September 30, 2010, was $7.9 million and deemed dividends attributable to preferred stock of $22.1 million which, when combined, resulted in a net loss applicable to common shareholders of $30 million, or a net loss per share of $1.41. As a reminder, deemed dividends attributable to preferred stock in 2011 refers to the accretion of the preferred shares. The deemed dividends for the period ended September 30, 2010, includes the accretion of the preferred shares and also the beneficial conversion feature related to the June 2010 financing. The beneficial conversion feature was a one-time expense reflecting the conversion price for the preferred shares being below the actual share price at the time of the financing.

Now let's take a look at the nine-month period. For the nine-month period ending September 30, 2011, Talon reported total operating expenses of $14.8 million, of which $11.1 million was for R&D. The net loss for the period was $17.2 million and deemed dividends attributable to preferred stock of $2.9 million, which, when combined, resulted in a net loss applicable to common stock of $20.1 million, or a net loss of $0.94 per share. For the nine-month period ending September 30, 2010, Talon reported total operating expenses of $19.3 million, of which $15 million was for R&D. The net loss for the period was $19.7 million and deemed dividends attributable to common stock of $31.4 million which, when combined, resulted in a net loss applicable to common shareholders of $51.1 million, or $2.48 per share.

Over to the balance sheets, as of September 30, 2011, we had current assets of $4.8 million, including cash, cash equivalents, and available-for-sale securities of $4.6 million, compared to current assets of $22.9 million as of December 31, 2010, including cash, cash equivalents and available-for-sale securities of $22.6 million. The $18 million reduction of current assets reflects nine months of operating expenses since December 31, 2010. Our total current liabilities as of September 30, 2011, were $3.6 million, compared to $6.1 million as of December 31, 2010. As of September 30, 2011, we had long-term liabilities of $29.1 million, and the primary contributor to that figure is the $23.9 million and notes payable due in June 2015. Under commitments and contingencies, the line item called redeemable convertible preferred stock was valued at $30.6 million. This reflects the $40 million convertible preferred investment reduced by the value of investors optioned to purchase an additional $60 million in preferred shares.

As of September 30, 2011, Talon had total shareholders deficit of $57.7 million, compared to $41.9 million at the end of 2010. Now, as stated in our last few 10-Q filings and our 10-K filing as of December 31, 2010, we have enough cash -- as I stated earlier, $4.6 million -- to last until the end of 2011. With the timing of our PDUFA date to mid-May 2012, we estimate the need for an additional $10 million to $12 million to fund our operations through the middle of 2012. Our activities will be focused on preparation for the ODAC meeting and the cost to initiate our Phase 3 confirmatory trial in the US in order to get the first patient enrolled in the study prior to the ODAC meeting.

Now, we have discussed during previous investor calls that we have been pursuing three paths to raise additional capital -- one is funding via our preferred shareholders; the second is other equity and/or debt financing; and the third is a cash infusion from a business development licensing arrangement. While I am not able to provide any details at this time regarding the status of any financing discussions, we are confident -- I will repeat, we are confident we will raise the necessary capital prior to the end of 2011. The financial review now has been completed, and Steven and I will now entertain questions.

(Operator Instructions) Ron Jon Mau, Muay Sai Ventures.

Good morning, it is (inaudible) here. I just wanted to get a sense on the last comment that was made by Craig on sort of confidence in the financing. What are you looking to solve for in the financing? Are you looking to solve to take you beyond the PDUFA date comfortably? Are you looking to do a major financing and any color you can add, regardless of which path you end up using, what you are solving for?

Our focus right now is to take us a somewhat past the PDUFA date, so more or less in the middle of 2012. And obviously we will have a lot more insight with regard to what our path forward is as it relates to future funding in the middle of May when we get the answer from the FDA on our NDA.

Okay. And just a quick related question, given that you are now focused on HALLMARQ and the German trial, I'm not sure where the cost lie on that. What is your estimate of the quarterly burn rate for the next three quarters if you will? This quarter and the next two quarters.

We have been operating in a $5 million to $6 million per quarter range, and so we are -- through the middle of 2012, we believe we will stay in that range. And when we get past that range, and assuming success, then we will start needing to initiate our global Phase III HALLMARQ trial, and the global phase of that, there is likely to be some increases in our R&D expenses related to that in the second half of 2012.

Okay. And then one last question, I missed the description of what the three paths were, I think I heard parts of it. Could you just repeat that one more time?

Yes, the first is funding via our current preferred shareholders, the second is other equity or debt financing, and the third is cash infusion coming from a licensing deal.

Thank you, I appreciate it.

(Operator Instructions) Mai Pogue, Pogue Capital Management.

This question is for Steven, did you ask for priority review, and will you be supported to get approval with that? And did the FDA ever give you reason why you they didn't give you priority review?

We received a standard review, the only assumption that we can make is that the decision that the FDA made was based on an early and initial assessment of the data package. We are not disappointed because of the fact that the standard review gives us a far greater likelihood of being able to deliver on the extremely important item, namely the initiation and commencement of enrollment in our confirmatory trial prior to a potential approval action date. So really, if we had been giving priority review, I would not have been disappointed, but I believe we would have had almost no likelihood of being able to deliver on that FDA request. Now, we have the ability to deliver, and to go into our ODAC and an approval decision, having delivered everything that the agency has asked of sponsors like Talon that are seeking accelerated approval.

This is for Craig, you said that the path to financing is in licensing, is that licensing for Marqibo or licensing for other products that you have?

Our focus has been looking at licensing Marqibo ex-US as well as potential licensing in our Menadione topical lotion.

Okay, thank you.

At this time I would like to turn it over to Dr. Deitcher for any closing remarks.

I want to thank everyone for their participation in this call, and mostly I thank our investors for their encouragement over the past several years. That encouragement is very much an important fuel that has driven us to where we are now within months of the ultimate goal. I feel like we have been on a 4.5 to five year marathon run. We are definitely in the home stretch. The team here is geared up for and has been actively preparing for our ODAC presentation and continuing to defend our NDA, and our goal is to bring this to a success and create the value that everyone has been certainly waiting for. So again, I think this has been an excellent and outstanding third quarter. We are pushing for an equally stellar fourth quarter with regards to our development performance, and I look forward to updating people again in several months. Thank you very much.

Ladies and gentlemen, thank you for participating in today's conference. This concludes the program, you may all disconnect. Everyone have a great day.