Spectrum Pharmaceuticals Inc (SPPI) 2012 Q1 法說會逐字稿

Good day ladies and gentlemen, and welcome to the Spectrum Pharmaceuticals, Inc. first quarter 2012 financial results conference call. (Operator Instructions). Now, I would like to turn the conference over to the Vice President of Strategic Planning & Investor Relations. Shiv Kapoor.

Thanks, Matt. Good morning and thank you all for joining us today for Spectrum's first quarter 2012 financial results conference call.

I am Shiv Kapoor, Vice President of Strategic Planning & Investor Relations for Spectrum Pharmaceuticals. With me today are Dr. Rajesh Shrotriya, Chairman, CEO and President; Brett Scott, acting CFO; Dr. Steve Fruchtman, Chief Medical Officer; Jim Shields, Chief Commercial Officer and other senior members of the Spectrum management team.

Here is an outline of today's call. First, Brett will provide a summary of our first quarter financial performance. Dr. Shrotriya will then provide you with highlights for the first quarter and recent news. We will then open up the call to questions.

Before I hand the call over to Brett Scott 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, the safety, efficacy, development 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 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, April 26, 2012 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 these updates to the investing public.

For copies of today's press release, historical press releases, 10-Ks, 10-Qs, 8-Ks and other SEC filings and other important information, please visit our website at www.sppirx.com. At this point I would like to hand the call over to Brett.

Thank you, Shiv, and good morning to everyone on the call today. I am pleased to report this is our sixth consecutive profitable quarter and best ever. We closed the quarter with cash, cash equivalents, investments, and accounts receivable of more than $253 million, up from $222 million in the previous quarter.

Now, let us review the results for the quarter ended March 31, 2012. All numbers are approximate. For the three month period ended March 31, 2012, we had total revenues of $60 million, compared to $44 million in the first quarter of 2011, an increase of 37%. Product revenues were $57 million as compared to $41 million in the first quarter of 2011, an increase of 39%. FUSILEV sales were $51 million with ZEVALIN sales being approximately $6 million.

Net income was $47 million or $0.80 per share basic and $0.71 per diluted share as compared to net income of $13 million or $0.25 per basic and $0.23 per diluted share in the first quarter of 2011. On a non-GAAP basis, diluted earnings per share for the first quarter of 2012 was $0.40 per share.

Total research and development expenses for the first quarter were $7.5 million, not including noncash and one-time charges of $1.4 million as compared to $5.4 million in the same period of 2011, not including noncash charges of $0.4 million.

Selling, general and administrative expenses for the first quarter of 2012 were $14.6 million, not including noncash and one-time charges of $3.7 million as compared to $9.1 million in the same period of 2011, not including noncash charges of $3.7 million.

In summary, our revenues were up a strong 37% over the same quarter last year due primarily to better market penetration of FUSILEV in the metastatic colorectal cancer market. Showing the significant operational leverage of our business, in the same period our net income was up 264% over the same quarter last year resulting in a strong cash balance. We ended the quarter in the strongest financial position in our history. I will now hand the call over to Dr. Raj Shrotriya.

Thank you, Brett. And good morning, everyone. The outstanding performance that we have had quarter after quarter shows how focused we are on growing our core business. And at the same time maintaining our fiscal discipline. Now, we have had six consecutive profitable quarters and at Spectrum we continue to be very excited by ongoing strong revenue growth and market penetration. We are also enthusiastic about our advancing pipeline and recently announced business development transactions.

Let me first talk about FUSILEV . Just a year ago in April of 2011 the FDA approved FUSILEV for the treatment of advanced metastatic colorectal cancer, the third leading cause of cancer deaths in the United States. FUSILEV utilization grew significantly throughout 2011 quarter after quarter, and this quarter we continue to see strong product adoption. Factors relating to both the attributes of FUSILEV and the dynamics in the marketplace give us the conviction that we will continue to see more market share growth in the future.

Oncologists see FUSILEV as a product that is good for their patients and good for their practices. We continuously work with clinicians to discuss and promote FUSILEV . We assure them of adequate product supplies both in the short-term and the long-term. Once a physician has started a patient on FUSILEV containing regiments they are confident that they will be able to complete therapy without concern for product availability.

Colorectal cancer treatment regiments usually last between four to six months. Typically physicians do not change drugs that are administered every four to six weeks once treatment has been initiated as long as patients are not progressing.

Since September 2011 FUSILEV has been supported by 40 dedicated sales representatives calling exclusively on oncologists treating colorectal cancer. Consistent and vital commercial support for FUSILEV is being rewarded by customer loyalty. This is evidenced by the first quarter reorder rate of over 90%.

Further, an increasing number of practices continue to use our product. This quarter we had 1,263 accounts that ordered FUSILEV . And this compares to 549 accounts that had ordered FUSILEV in the previous quarter.

In the face of increasing demand we have increased our supplies and ready to ship reserves for FUSILEV . Given the current market dynamics we believe our strategies will ensure that physicians and patients can rely on FUSILEV in the future.

I will now speak briefly about ZEVALIN for which there were two key developments in the first quarter of this year. First, we entered into an agreement to acquire the worldwide rights from Bayer to sell ZEVALIN. ZEVALIN is approved in 40 countries outside the United States including countries in Europe, Latin America, Spain and Asia. We have initiated commercial and clinical development efforts that utilize a combination of Company resources and partnerships to support ZEVALIN.

For example, in Japan, pharmaceutical division is a commercial partner. They are equally excited about ZEVALIN.

In the first quarter of this year as part of the repositioning campaign we launched a new patient program which, among other initiatives includes a dedicated website zevalin.com. The website features compelling patient testimonials who have been treated with ZEVALIN. Among other direct to patient efforts we believe this will empower patients through knowledge.

In addition to focusing on patients, we continue to reach out to physicians and payors to further increase brand awareness of ZEVALIN. We believe the removal of the bioscan and ongoing clinical programs will be long-term growth drivers for ZEVALIN.

Let me first talk about the removal of the bioscan. Consistent with our previous expectations this significant label change has not had an immediate impact on sales of ZEVALIN. There are various federal nuclear regulatory commission, or NRCs, and local state authorities licensing requirements that are delaying the impact of this key approval on sales. It may take us several quarters before patients can benefit from this FDA action.

Prescribing hematologists and radiation oncologists still need an authorized user license before they can treat patients in their offices. We continue to believe there will be a meaningful impact of the bioscan removal on ZEVALIN sales, but it will be gradually and over the longer term.

Let me cover some of the key clinical development programs that are associated with ZEVALIN. Through targeted recent programs we plan to expand and broaden indications for ZEVALIN.

First, our expanding ZEVALIN usage in newly diagnosed patients. We are designing a study to compare a single dose of ZEVALIN to standard up front therapies that often require multiple months of combination cytotoxic chemotherapy. This proposed study follows two European studies that represented at the American Society of Hematology annual meetings in 2010 and 2011.

The latest study in which a single dose of ZEVALIN showed a complete response rate of 84% and overall response rate of 93% when conducted in newly diagnosed patients who require treatment for the disease. This study has generated great, clinical interest from lymphoma experts worldwide. On May 12 we have convened a meeting of lymphoma experts to finalize the protocol.

Second, we are anticipating initiation of the ZEST trial soon. This trial is aimed at broadening ZEVALIN's indications in aggressive lymphomas such as diffused large basal lymphoma.

Third, we are continuing to study historical record ZAR which is comparative to a single dose of ZEVALIN versus two years of reduction mass for maintenance. This study was started by Bayer in Europe several years ago and we expect initial data from this study by the end of this year.

Let me now talk briefly about our recently announced acquisition. Earlier this month we announced the planned acquisition of Allos Therapeutics, Inc. Allos Therapeutics marketsFolotyn, a drug used to treat relapsed or peripheral T-cell lymphoma, or PTCL.

Folotyn was launched in 2010 as the very first drug ever approved for the treatment of PTCL. Folotyn achieved sales of $50.5 million in 2011. We believe this acquisition will be synergistic to Spectrum in many ways.

First and foremost, Folotyn and ZEVALIN are marketed to the same group of physicians, hematologists, oncologists which could have better leverage in combined sales and marketing efforts, (inaudible) efforts, regulatory and clinical structure.

Second, we believe there could be significant cost related synergies from this acquisition. And finally, the combination of Folotyn with FUSILEV and possibly with Belinostat could be advantageous for PTCL patients. We look forward to updating you in the coming weeks on the closing of this transaction.

I would now like to take the time to discuss our exciting pipeline. We believe there are some hidden gems with multi billion dollar potential in our pipeline. First let's review Belinostat which has been studied for a range of indications.

Our [fifter] trial is evaluating the drug in patients with the last refractory PTCL. Belinostat has a totally different mechanism of action as compared to Folotyn. We plan to develop Belinostat for additional indications. Patient enrollment in this trial was completed as of September last year and we are expecting topline data in the fourth quarter of this year.

With respect to our single installation bladder cancer trial for apaziquone, a meeting with the FDA is under consideration. For patients with more invasive and aggressive bladder cancer we continue to enroll patients in a multiple installation study of apaziquone versus placebo. In a Phase II study patients had complete response rates of 67% after multiple installations of apaziquone.

Regarding earlier stage drugs, in the first quarter we signed a licensing agreement for a novel biologic drug we call SPI-2012. SPI-2012 is a long acting GCSF, or Granulocyte colony-stimulating factor, being tested for the treatment of chemotherapy induced neutropenia or the reduction in white blood cells. The market for GCSF related drugs such as Neulasta was over $5 billion last year.

A US based study has shown that SPI-2012 resulted in a more rapid and intense recovery of white blood cell count at one third the dose of Neulasta. We expect to initiate a randomized Phase II trial in chemotherapy induced neutropenia in patients with breast cancer.

Regarding SPI-1620 which is a novel endothelin agent, we believe we have previously reported promising early Phase I trial. Based on these findings we have now established a dosing regiment, a schedule for a Phase II program which we plan to initiate later this year.

Our next drug in development in Phase II trial is a drug called Lucanthone which is a novel radiation sensitizing drug which is being developed for a brain cancer called GBM, or glioblastoma multiforme. We expect to initiate Phase II randomized study soon and this will consist of patients receiving standard of care with and without Lucanthone. There is significant unmet medical need in this patient population.

In conclusion I'm extremely pleased with the progress this quarter despite having announced key acquisitions that we believe will further future growth. We have not lost sight of executing our strategy in the near-term. The next few months will be exciting and we plan on closing and integrating key acquisitions. I can assure you that we will continue to be focused on growing operational profits through this period and beyond.

We will now open the call to questions. As you can understand, we will not be taking any questions with regard to Allos transaction. In light of the fact that the tender offer is still pending. We look forward to addressing those questions at the close of the transaction when we plan to have a conference call.

(Operator Instructions). Our first question comes from Ren Benjamin with Rodman. Your line is open.

Hi, good morning, Raj and team and congratulations on the outstanding results. Just a couple of quick questions. Raj, can you comment at all regarding the CHMP opinion of Folotyn? How does that affect your thinking at all if it does? Are you guys there?

Ladies and gentlemen, one moment, please. We may be having a brief technical difficulty.

Are you guys there?

Yes, just this second.

Okay. All right.

Can you hear us now?

I can now, yes.

Okay, good. So Ren, that Folotyn is being developed in Europe by Allos' partner Mundipharma. They are managing this.

The registration application was submitted. It was not approved by the European authorities because they require the randomized trial. However, Mundipharma did make an appeal on behalf of Allos personnel and that appeal was again denied.

So all I can say at this time is that the European authorities are maintaining that they need a randomized trial. However, Mundipharma is still concentrating what their options are. I believe they have very convincing data to show that Folotyn is safe and effective, however, it remains to be seen whether they can convince the CHMP.

Okay. Switching gears just very quickly to FUSILEV . You provided a lot more information especially regarding the reorder rates in this conference call and how many accounts have signed up. Can you just help us understand is the amount of accounts that you currently have, what percentage of the total accounts that is? I guess it is a round about way of asking what your current market share is and where do you think you could build that to?

So Ren, let me try to say that, first of all, the reason we provided more visibility to FUSILEV is because ever since we he have launched FUSILEV quarter after quarter we have seen increasing traction, increasing utilization, increasing in sales. However, there are some people who misunderstand FUSILEV . They somehow think that FUSILEV is the same as the generic levoleucovorin which it is not.

FUSILEV has it's own J code. It was approved in 2011. As compared to levoleucovorin that had a 50% impurity and was approved in 1952 by the FDA more than 60 years ago.

I've said until I'm blue in my face that in Europe and Japan ex-US, levoleucovorin brings about $200 million a year when they have no pricing flexibility and this drug has been available for more than ten years. As genetic levoleucovorin which sells about $20 million a year ex-US. So clearly we believe that with the virtues that FUSILEV has and the J code that it has and the fact that we are promoting it through a dedicated sales force, we have seen that increasing number of accounts including most community doctors and even hospitals are now buying FUSILEV .

I think that the number is now between 21%, 22% market penetration that we have achieved right now. And in next quarter Brett we will be able to give you a better idea what the (inaudible). But I think the important thing is we have seen increasing number of people who never ordered FUSILEV before and some of them said they never would use FUSILEV, we have seen the increasing number of these people are coming around and ordering FUSILEV .

Perfect, okay. And then just switching gears to the pipeline real quick.

I guess I'm just trying to for modeling purposes get a better sense as to when many of these studies will actually begin, whether they are more first half or later in the year meaning like fourth quarter? Could you give us a little bit of color there?

And then could you just dig into the apaziquone studies a little bit. You mentioned the single administration and the multiple installation ongoing. Given the Phase III results that we have seen does, it make sense to bring that program to a close? What are your thoughts regarding continuing with that program?

So, let me talk, first of all, on our pipeline. So as you saw we have a number of drugs that are in Phase II trials and they are in Phase II because we have seen some exciting data in Phase I. We know how to dose this drug and we know what patients to select for the patient population. These trials will begin slowly gradually over the next two to three quarters. So you won't see it all of it transpiring in one quarter for example.

We do not use CROs as you know. We have our own people. As the people are coming off the apaziquone program they are being assigned to the newer trial. You will see some increasing every quarter we will be starting some new trials. One or two trials every quarter.

And mind you because we control all of the development in house we can manage our expenses. We don't allow our burn to go out of control. We are always in control of how much money we want to spend in any given year on any one project.

With regard to apaziquone my view that we have a partner, Allergan, and everything we do with apaziquone is in consultation with Allergan. The multi efficacious study was started in September of last year and it was done with an idea that in Phase II trials we saw 67% response rates when the drug apaziquone was given every week for six weeks. And mind you the current trial that we did apaziquone was given only once for 60 minutes topical application.

And we were looking at two year data and we find that with each indigenous study did not meet the stated criteria that is in the special protocol assessment. When you combine the two studies the data is highly significant. People use less than .001.

So clearly the waiver of the (inaudible) expert told us recently they said if there is one thing you can do to a patient, one thing, just one little thing that you give apaziquone for 60 minutes in their bladder and you reduce 20% chance relapse of cancer. Will these patients be willing to take apaziquone or not?

We believe there is a lot of excitement in the community. We believe that this data that did not meet the stated criteria of the protocol of the SPA, however, the data shows that number one, that apaziquone is active, and number two, when you combine the two studies the data is highly significant.

Clearly those are the things that we are now consulting other experts in the field. We are looking at history of FDA approvals based on such data of combining two studies and we have found some examples. So we are discussing our strategy both inside with Allergan and with outside experts and then see what we should be doing.

Terrific. Well, just one last question regarding presentations that are upcoming.

Last year you had a blowout year at ASCO with the number of presentations. Can you give us a sense, I mean it either ASCO or ASH? Maybe it was ASH.

Give us a sense for the rest of the year any data presentations? Even the apaziquone Phase III results if we might see those?

Yes, I will have Dr. Fruchtman. Steve?

So, we do anticipate based on the pooled data that Dr. Raj has described for the single installation apaziquone trial will be when the data is finished being analyzed it will be presented at an academic urology conference to be identified.

In addition, regarding our other drug ZEVALIN we have a new oral presentation at an upcoming EHA meeting, European Society of Hematology where ZEVALIN when combined with [DEEM] which is the standard of care was superior to being alone for patients with refractory lymphoma undergoing transplants. Those are the two most near term presentations at academic meetings that we anticipate.

Perfect guys. Thank you very much and congrats for a blowout quarter.

Thank you. (Operator Instructions). Our next question is from Joe Pantginis with ROTH Capital.

Hey, guys. Good afternoon and congratulations on the numbers as well. Raj you gave us during Q&A as well some real important realities around the FUSILEV franchise and the strength of the franchise. But there are still I would say some opposing forces out there about prominent potential perceptions on the drug. Specifically what potential impacts the Leucovorin shortage abating might have on FUSILEV . Like I said it is potential perception.

One general question and one more specific question. How do you make the street comfortable with this reality versus perception concept that I think is out there in a prominent fashion about the FUSILEV sustainability? And more specifically, do you think you can share with us any of your own marketing intel that you have out there about the current availability of Leucovorin?

Joe, good question. In fact, I like that question because I have always believed that we will keep performing every quarter. People say how come you don't give guidance? And I said every quarter you will know what we are doing. For six quarters we have been proving the non believers wrong. I have no idea how long it will take for us to say they start believing us.

We will keep performing. We are giving you more clarity, more granularity and more color because as you can see more and more increasing number of people are buying FUSILEV who never bought before. Clearly our internal analysis shows that we will continue to get more traction for FUSILEV and we will continue to grow sales on FUSILEV .

We continue to drum up business and our focus of running business which is profitable, which is growing. That is where our focus is.

We don't care about the noise. The noise of our generic is just plain and simple noise. What happened Abraxane got there Paclitaxel approved? There was exactly (inaudible) because generic at that time. Paclitaxel started selling $250 million, $300 million a year. FUSILEV is not generic Leucovorin. It is a pure isomer that is now approved by the FDA with it's own J code.

And Spectrum is assured we have multiple manufacturers approved by the FDA and we are keeping supplies in reserve, so our patients will never go untreated because they can't get a hold of FUSILEV . So we are here to stay in business and we are remaining very focused on what we are doing. We believe that the sales of FUSILEV will continue to grow.

Thank you and maybe just a quick follow-up on ZEVALIN. You could you share any more additional color with regard to the ex-US initiatives. Obviously you've just acquired the rights, a lot of background activities going on, but maybe you can state some of your initial goals as to what you are looking for initial uptake for the drug?

So Joe, the drug is already approved in 40 countries and clearly we have a transition team that is looking how to exploit the approval of this drug in 40 countries. Japan and Europe are two major countries.

In Japan, Fujifilms which is a major pharmaceutical arm of Fujifilms is our partner. They are very excited about ZEVALIN. Just last three or four weeks ago our team from Spectrum went and visited with the folks and their excitement continues.

And in Europe we have established with Bayer an 18 month contract where they transition services they will provide to us. Meantime we will have a buildup as to how we are going to promote ZEVALIN in Europe, and we are also looking into Latin America. Brazil is a big market.

We are looking into other markets as to how and where we will make the impact. This is too soon, but I'm hoping by the next quarter you will have a little bit more color on this.

Okay. Thank you. Thanks a lot, guys. Great numbers again.

Mind you, there is no drug, there is no anti cancer drug that I know that you give single dose, one dose treatment and you are done for next eight years. This is an amazing drug. Single dose treatment and 93% overall response rate.

We just have to keep working on removing the last bit of hurdle which is the nuclear radiation commission and because after 9/11, the NRC passed a law that anything that is radioactive cannot be given by doctors. You need a special handling license.

ZEVALIN is treated the same way as a weapon grade uranium, my friend, and I believe this drug doesn't make people radioactive. This drug is safer than iodine that is given to thyroid patients by endocrinologists, or the drugs that are given by cardiologists.

I believe there is misinformation and we are working through Congress and Senate trying to change how this drug should bed administered. Access to patients is currently being denied by the revelations that exist at NRC and at the state level and be able to change that. It will take time, but we are going to change that. We are committed. There isn't a drug that is as effective and as safe as ZEVALIN.

Thanks again.

Thank you. The next question from queue comes from Difei Yang with Auriga. Your line is open.

Thank you. I have a couple of follow-up questions on FUSILEV . So, Raj, could you help us to break down that 1,263 accounts. Could you let us know roughly what percent are coming from the community system offices and what percent are coming from hospitals?

So before I ask Rick to comment on this, I tell you that 80% of our business comes from community and 20% on hospitals on an average. However, we have seen that periodically hospitals increase their orders. And when you say 1,263, we are talking about every single person who has ordered FUSILEV in the last quarter. So Rick maybe can you add a little bit more color to this?

Internally we do have some numbers in the breakdown of hospitals versus clinics and how they fluctuate. However, as Dr. Raj stated, the general rule is the 80/20 split and at this time we don't have anything different to report on that.

The 80/20 split has that been a stable number since last April when you get your new indication approval?

They have fluctuated a little bit in favor of -- sometimes there is a little bit more high percent on the hospitals and less percent in the community and vice versa. But in general when we look back that is pretty safe break down of our business.

Yes, okay. Thank you. And another question is related to reimbursement on FUSILEV .

So there are arguments out there. People are saying okay, right now there is a generic Leucovorin shortage. People with knowledge. Generic Leucovorin is different from FUSILEV.

But the argument is that when generic shortage falls off let's say a year from now, could be six to nine months from now, do you think those doctors who actually feel comfortable to use FUSILEV and they are currently being reimbursed, but do you think when that changes those doctors will be forced by the payors, say well, why don't you go back to a cheaper drug? How do you think about that?

We can't worry about what might happen in a quarter or two. We are very focused in building up business. Mind you, we have a dedicated sales force that is battling every single day talking to community doctors and hospitals promoting FUSILEV . Nobody to the best of my knowledge promotes a generic drug, any generic drug.

So therefore we are focused on building up business, and I have said in my prepared remarks there are doctors who tell us FUSILEV is good for their patients and good for their practice. I mean I could go blue in my face. I mean I could tell you that every quarter after quarter I would be telling you the same thing. And there is some non believer, so we keep saying they talk to two people and they say they are not going to use FUSILEV , then the FUSILEV sales would go down. I have no idea what their interests are, they are spreading misinformation.

We are giving you numbers. It is the strategy of Spectrum, we are oncology focused, diversified and disciplined. The reason we have a diversified portfolio is because we know this business.

Some drugs will be favorable in the quarter and not a second quarter, some will be successful and some will not be successful. This is why we have a diversified portfolio with revenue coming from multiple sources and multiple directions. We are focused on a strategy of delivering value every single day.

I cannot comment on what will happen to generic drugs. I just cannot. Know that our drug is FDA approved. It has its own J code and they are promoting it aggressively.

We keep our highest number of patients who benefit from this drug are US patients who have colorectal cancer with no other hope. These treatments are to be given every four to six weeks for six months. And we make sure that these drugs are available for them.

Yes, thank you. So another last question is related to ZEVALIN. So you have talked about there is one last hurdle with regards to the nuclear medicine sign of the regulation. Could you give us a little guidance as to how long do you think we might get to a place where this last hurdle is removed?

So I said I expect several quarters. I mean I hope this can be done in next four quarters, but I can't guarantee that will happen. We had several meetings with the NRC commission and in fact when we talk to them face to face they say it should be. ZEVALIN shouldn't be because more drugs that have alpha emitters like radioactive iodine, drugs that are used for product scanning, drugs used for cancers, they are not administered by nuclear fission experts. They are administered by ordinary physicians.

Drugs like ZEVALIN used to be given by hematologists, oncologists until 9/11 and the Homeland Security came in and passed a law that has anything related to nuclear activity requires a special license and several hours of training by the doctors. We are now making progress and I'm hoping that we will succeed in less time rather than more, but at this time I can't give you any more guarantees.

Yes, thank you. That is very helpful. And congratulations on a great quarter.

Thank you.

Thank you. I show we have time for one more question. That question will come from Ed Arce with MLV & Co. Your line is open.

Hello, everyone and thank you for taking my questions. Actually, most I of my questions have been answered, but do I have a few extra ones, last remaining ones just to confirm. First one is with regards to the new information that you provided around the number of accounts that ordered FUSILEV . I just wanted to be sure the 549 accounts, the number, is that for the first quarter of 2011? Or is that for the fourth quarter, the previous quarter?

That is for the quarter just before this quarter so that would be Q4 of 2011.

Okay. Got you. I'm not sure if this has any bearing yet, but given the pending acquisition of Allos and the acquisition of the ZEVALIN rights do you anticipate that the current guidance for R&D spend might be adjusted?

The short answer is, yes. Clearly in about two weeks time our tender offer close in May. The closing deadline right now is May 10. And if it happens on that day, yes, soon after that we plan to have a conference call and at that time we should be able to give you a little more clarity, a little bit more color. We are talking to the folks there and we are looking into what business projects are underway, and we hope we will be able to provide you more guidance on the next conference call.

Okay. Great. And on the gross margin that was significantly higher this quarter, I assume that to some extent that is for the removal of the bioscan requirement and do you anticipate that higher margin is sustainable from this point forward?

I think our margins are similar to what we had last year and cost of goods really increased over the year. So I think in our business when FUSILEV contributes significantly to our margin of profit I think as FUSILEV sales will grow you will find actually margins will grow. We have less margin of profit on ZEVALIN and more on FUSILEV . The more revenues comes from FUSILEV, our margins are better.

Okay. And one last question. On the tax deferred tax benefit. Is that a one-time item, or is this actually a recognition of NOLs that you anticipate continuing?

Brett?

Yes, Dr. Raj. Yes, that was a recognition, if you will, for NOL carry forward, the benefit from NOLs from prior periods because we have established a pattern of profitability and growing revenues we were able to recognize this tax benefit in this quarter.

So there is some SEC law that in fact allows you, or forces you to do it. But this is one time.

Okay. So we wouldn't necessarily expect this going over the next few quarters?

There will be, but not at this level.

Great. Okay. Understood. All right. Thank you. And again congratulations on a good quarter.

Thank you.

Thank you.

Thank you. And at this point I would like to turn the call back to Dr. Raj Shrotriya for concluding remarks.

Well, in closing I would like to say that on our last earnings call we had said that 2012 would be a transformative year for Spectrum. Since the beginning of the year we have announced several milestones that increase shareholder value in our opinion.

Number one, the inclusion of worldwide rights for ZEVALIN. All the money we spent on R&D and other activities we can get benefit from by marketing this drug in 40 other countries.

Our planned acquisition of Allos. And agreement to bring in another promising biological agent to our development stage pipeline in Phase II. And finally and most importantly today we reported a record quarter with a net income more than tripled over the same quarter last year.

So it is a company that every last six quarters we have kept making press releases saying every quarter is the best quarter ever, and I hope to continue to do that. Thank you very much for your time today and your support. Stay tuned, the best is yet to come.

Ladies and gentlemen, thank you for joining today's conference. This does conclude the program and you may now disconnect.