Spectrum Pharmaceuticals Inc (SPPI) 2012 Q4 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Talon Therapeutics 2012 earnings call and business update. At this time, all lines are in a listen-only mode. Later we will conduct a question-and-answer session, and instructions will be given at that time. (Operator instructions) I would now like to turn the conference over to your host, Dr. Steven Deitcher, President, CEO and board member of Talon Therapeutics. Please begin.

Welcome to the Talon Therapeutics 2012 year-end earnings call and investor update. On behalf of the entire Company, I appreciate your interest and support of Talon. On this call with me today is Craig Carlson, Talon's Chief Financial Officer.

Before we get started, I would like to remind everyone that Craig and I might make forward-looking statements. Basis in our company website at www.talontx.com (spelling), in order to review our most recent SEC filings, including our 2012 Form 10-K, in order to understand the risks associated with Talon Therapeutics.

2012 was a year rich in dedication planning and accomplishment. Our primary mission in 2012 was to advance Talon's lead compound, Marqibo, towards FDA accelerated approval.

Key accomplishments for 2012 include the following. As a result of compelling data from the Phase II RALLY trial of single-agent Marqibo in adults with relapsed and refractory Philadelphia chromosome negative acute lymphoblastic leukemia; a high-quality New Drug Application submitted to FDA in 2011 and over one year of intensive preparation and practice. Talon's management and key leukemia expert advisors were able to prevail at our Oncologic Drugs Advisory Committee meeting in March.

The overall positive felt was highlighted by unanimous support from all hematological malignancies expert members of the committee, including the then and current ODAC chairman. It's a tall order in importance of continuous drug exposure, complete remission induction, successful bridging to transplant, treatment tolerability, outpatient delivery of therapy and chance for cure afforded by Marqibo were each noted.

Following the affirmative vote by the ODAC, Talon successfully negotiated a favorable product label for an accelerated approval product. At ODAC, Talon specifically highlighted the second relapse adult ALL subpopulation of patients included in our studies and for which historical comparators exist. There are approximately 500 second relapse adult ALL patients in the US per year. Based on the multiple relapsed and refractory subpopulations included in our Marqibo development program, our labeled indication is for the treatment of adult patients with Philadelphia-negative acute lymphoblastic leukemia in second or greater relapsed or whose disease has progressed following two or more anti-leukemia therapies.

This labeled indication actually addresses approximately 1700 adult ALL patients per year in the US. Our label is designed to maximally support product safety and minimize the potential for product preparation error.

Because of careful planning and execution during label negotiation, Marqibo can be prepared in both inpatient and outpatient settings and by pharmacists, pharmacy technicians, nurses and others involved in chemotherapy preparation. There is no REMS for Marqibo.

Hard work, confidence and tenacity were rewarded in August of last year when Marqibo was granted accelerated approval. Approval triggered several new activities and initiatives. Marqibo approval infused energy into the already ongoing and enrolling clinical trials. The Phase III German cooperative group trial in untreated aggressive Non-Hodgkin's Lymphoma, known as the OPTIMAL)60 study, completed activation of the initial 30 trial sites in 2012 and quickly achieved its target enrollment rate. An additional 40 sites were identified and quickly added to the trial as a means of accelerating enrollment and overall trial time lines. Because Talon's financial contribution is based on enrollment metrics, site expansion has not added any financial burden to the Company. Currently, even more sites are being added in Germany and expansion of the trial by the German high-grade lymphoma study group into another country is being explored.

The Phase III Marqibo confirmatory trial in adults with untreated Philadelphia-chromosome-negative ALL, known as the HALLMARQ study, enrolled its first patient in the United States shortly before product approval. This trial is under an SPA and continues to add sites in the US ahead of ex-US trial expansion.

Lastly, the Marqibo pediatric development program currently being run by the US National Cancer Institute is nearing completion of Phase I and identification of the Phase II dose. As expected, internal and external enthusiasm for these label expansion programs has intensified post-approval.

Because of our orphan designation in the EU, we were afforded formal scientific advice from the European Medicines Agency in 2012. This advice is an integral step towards submission of a marketing authorization application for Marqibo in Europe. As soon as the Phase II pediatric Marqibo dose has been determined and our pediatric investigative plan has been submitted and approved by the EMA pediatric committee, an MAA can be submitted.

Because of 100% focus on Marqibo approval and label negotiation efforts, all US commercial preparation efforts began following approval. Preparation efforts included those related to advertising and promotion, pricing and reimbursement, distribution and logistics as well as medical affairs and publication planning.

An awareness campaign was initiated to coincide with the 2012 American Society of Hematology annual meeting in December in Atlanta, Georgia. This campaign included an exhibit booth, advertisements in major journals such as the Journal of Clinical Oncology and Blood, online rapid communication publication of the pivotal Phase II RALLY trial data in the Journal of Clinical Oncology and a special event for key US leukemia experts.

In September, following Marqibo approval, Talon started to respond to requests from other companies for initial informational meetings regarding Talon, Marqibo and Menadione topical lotion. Please keep in mind that Marqibo, based on its initial label, is a niche product with ongoing research and development activities focused on potential future label expansion opportunities and upside, primarily linked to the OPTIMAL)60 study in a lymphoma indication. On our last investor call I stated that it was more likely than not that Marqibo would be launched following the transaction. This Company stance remains.

In early January of this year, Talon announced that the Board of Directors had authorized a review of strategic alternatives. Goldman Sachs was engaged to provide financial advisory services. The review of strategic alternatives may lead to a possible transaction, including the merger, business combination or sale of the Company. No decision has been made to enter into a transaction at this time and there can be no assurance that Talon will enter into a transaction in the future. I must make clear that the Company does not plan to disclose or comment on developments regarding the strategic review process until further disclosure is deemed appropriate. I ask that you respect this corporate decision and acknowledge that any ongoing discussions and negotiations could be hampered by premature disclosure.

While 2012 was dominated by activities related to Marqibo, I would like to provide a brief update regarding our current lead product candidate, Menadione topical lotion. A randomized multi-center Phase II study of Menadione topical lotion for epidermal growth factor receptor inhibitor-related skin toxicity prevention sponsored by the Mayo Clinic has been ongoing and is projected to complete enrollment and undergo analysis this year. Because this proof of concept trial is double-blinded, Talon is unable to provide any form of interim efficacy update. The results of this trial are intended to guide the design and sample size determination of a future pivotal Phase III registration trial.

At Talon we continue to focus on our ongoing clinical development activities and on preparing Marqibo for commercialization. Marqibo components and kits have been successfully manufactured and released to support initial commercial efforts. Our publication strategy is concentrated on peer-reviewed publication of Phase II relapsed and refractory as well as untreated lymphoma data in support of applications for compendium listing. Our work force remains stable and is dedicated and intent on accomplishment this year, just as it was leading up to Marqibo approval in 2012.

I look forward to providing additional updates in the future. I will now turn the call over to Craig to review our financials from 2012. Craig?

Thank you, Steven, and thanks to everyone listening in to our call. We really do appreciate your interest in Talon.

For the 12 months ended December 31, 2012 we reported a net loss of $43.7 million and deemed dividends on preferred stock of $21.1 million which when combined resulted in a net loss applicable to common stockholders of $64.8 million or $2.95 per share.

The change in fair value of our preferred shareholders' right to purchase additional shares contributed $18.1 million or $0.82 a share to the total net loss applicable to common shares for this period. For the 12-month period ending December 31, 2011 we reported a net loss of $18.8 million and deemed dividends on preferred stock of $3.9 million which, when combined, resulted in a net loss applicable to common stockholders of $22.8 million or $1.06 per share. For the year ended December 31, 2012 we had total operating expenses of $20.8 million compared to $18.5 million for the year ended December 31, 2011.

R&D expenses for the year ended December 31, 2012 were $12.9 million compared to $13.4 million for the prior year. Included in the $12.9 million in R&D expenses for 2012 were $3.5 million in milestone payments triggered by Marqibo's approval by the FDA. G&A expenses for the year ended December 31, 2012 were $7.9 million compared to $5.1 million for the prior year. The $2.8 million increase in expenses was largely the result of commercialization readiness efforts that included hiring of employees, outside vendors and other commercialization-related expenses.

We continue to be efficient in our cash expenditures as illustrated by our cash used in operations of $20.2 million for the year ended December 31, 2012.

Okay, let's move on to a discussion of the balance sheets. As of December 31, 2012 we had current assets of $3.5 million including cash and cash equivalents of $3 million compared to total current assets of $1.7 million as of December 31, 2011. Please note that in January 2013 we brought in additional gross proceeds of $6 million from the sale of Series A-3 Preferred Stock.

Our total current liabilities as of December 31, 2012 were $17.8 million compared to $4.6 million as of December 31, 2011. The primary source of the differential is a liability of $14.3 million reflecting the investors' right to purchase shares of Series A-3 Preferred Stock as of December 31, 2012. Should the preferred stockholders continue to purchase shares of Series A-3, this liability should decrease.

As of December 31, 2012 we had total long-term liabilities of $25.4 million, of which $24.8 million was for the notes payable compared to December 31, 2011 of $24 million in long-term liabilities. As a reminder, the principal of our debt is $27.5 million, but we have to account for it net of discount, and so that is why it shows up as $24.8 million on the balance sheet. As of December 31, 2012 the line called redeemable convertible preferred stock was $47.9 million compared to $30.9 million as of December 31, 2011. This reflects the value assigned to the various preferred share purchases since mid-2010. You will note the stated liquidation value as of December 31, 2012 of $77.9 million for the preferred shareholders in a liquidation scenario.

As of December 31, 2012 Talon had total stockholders' deficit of $87 million. We anticipate our current cash lasting through May 2013. To continue as a going concern, we will need to raise additional capital either by a strategic transaction, by selling stock or by incurring debt. Now, our capitalization at the end of January, which includes this $6 million in preferred shares purchased in January 2013, totaled approximately 206 million shares on an as-converted and fully-diluted basis. This total includes approximately 171.6 million shares held by preferred shareholders and 34.8 million shares held by current common shareholders, stock options, warrants and other items. Please note that on an as-diluted basis and a fully-converted basis, this includes all shares, including shares that are currently out of the money.

Now looking forward, if we were able to raise additional capital, we anticipate potential cash usage during 2013 of approximately $20 million to $25 million, which is consistent with our cash usage in prior years.

That concludes the review of 2012 financial performance. I will hand it back to Steven to address questions that may come up. Thank you.

We would now be happy to entertain some questions.

(Operator instructions) [Bob Mattra], Private Investor.

I had a quick question about the uveal melanoma Phase II trial. Is that still ongoing; and if so, the status, please?

The Phase II trial where we are evaluating Marqibo in patients with metastatic uveal melanoma is continuing to enroll. It serves more than one function. One is to, yes, evaluating Marqibo in this population of patients that has basically little else to be offered to them, but that trial has also been useful for us in evaluating pharmacokinetics as well as demonstrating the fact that Marqibo has minimal to no adverse effect on normal bone marrow function. So that trial is wrapping up the last group of patients so that we can than evaluate next steps in this potential indication.

And a follow-up question -- is the PMA approval process for Marqibo in its current indication?

So the -- if we were to submit a marketing authorization application to the EMA for Marqibo, it would be in the similar indication to what we were granted in the United States this past year. So it's adults with acute lymphoblastic leukemia.

Right, and is the timing still on track? Is that still the first half of 2013?

Right now it's really predicated more on the pediatric investigative plan process, which is somewhat out of the Company's control. You get into a queue and the EMA reviews those proposals. So we will move that forward as quickly as we possibly can but I really am hesitant to pinpoint a time line for that.

So in essence, are you saying -- am I understanding you correctly -- that the pediatric could happen prior or before the current Marqibo indication?

No. In Europe, in order to submit a marketing authorization application for the adult relapsed refractory ALL label that we would be seeking, a prerequisite to submission is having a pediatric investigative plan for our drug evaluated and approved by the EMA. So in Europe you must have an approved process for developing your drug in pediatrics before they will even evaluate an application for your drug in adults.

Okay, thank you.

[Ronald O'Connor], private investor.

Dr. Steve, this is Dr. Ron O'Connor. Can you give me an update on the status of the Menadione trial?

So, as I noted in my presentation, that trial, which is being conducted and sponsored by the Mayo Clinic, is now active at four sites in the United States. So the Mayo Clinic decided to not only open it in Rochester and at their facility in Scottsdale, Arizona, but also had requests for participation by two other locations in the US. From an enrollment standpoint, we have enrolled 24 out of the desired 40 patients up to this point, and I expect enrollment to complete this year and an analysis to take place.

Because it's a blinded trial, I have no way of providing any kind of insight into the comparative efficacy. It is a randomized trial. I can tell you, though, that because Talon does also monitor the safety and the reporting of any safety issues that there have been no toxicity issues of note, and that's a very positive finding for us.

So, again, we look forward to getting results from that proof of concept trial so that we can make appropriate plans for next steps.

Thank you. I got home late, so I'm sorry I didn't hear you mention that information earlier.

No problem.

With the indications for this current trial, it is limited to indications for use with certain chemo agents; is that correct?

So the current Phase II MTL trial is being conducted and looking at the prevention of skin toxicity related to anticancer drugs which target the epidermal growth factor receptor and patients in this trial are able to be enrolled regardless of whether they were receiving small molecule or antibody-based therapies that target the epidermal growth factor receptor. So this has not been a trial restricted to usage with only one or another of the currently marketed eGFR inhibitors.

Would that include monoclonal antibodies which have adverse skin effects?

Antibodies targeted against epidermal growth factor receptor which are affiliated with these cutaneous toxicities, yes.

Would you happen to know offhand if a product called Vectibix, which has a huge, like 80%-plus adverse skin reaction -- if that's included in this mix?

Patients are able to go on to this trial if their eGFR inhibitor is Vectibix, yes.

Oh, okay, great, thank you very much.

(Operator instructions) [Joe Shanela] Arena.

I have a quick question about the outstanding shares. What would be the number of outstanding shares in a change-of-control scenario?

There are a variety of different scenarios, but it could go as high as 450 million shares.

Okay, and a second question that I have is in terms of -- I saw an SEC filing probably last February that went over the change of control payment plan. Can either Steve or Craig clarify that in terms of the percentages for the senior directors?

Yes. The change of control calls up to a maximum of 9% of proceeds.

Okay.

Now, the thing to keep in mind is that there are a number of exclusions related to that. So that 9% does not take effect -- and again, that's a maximum of 9%; it could be less, it depends on the scenario. So prior to that 9% being applied, the exclusions would include the various transaction-related costs. They would include the payment of the debt, which is $27.5 million. And it would exclude all of the equity invested since June of 2010, which totals today approximately $69 million.

Okay.

So after all of that has been excluded, then a maximum of 9% could be applied to a variety of executives within the Company.

Okay, thank you, guys.

[Brian Testa], Private Investor.

I just had a quick question. If -- you said there is no assurance that you are going to get a partner or sell the Company. And if that doesn't happen, what are your plans to market Marqibo on your own?

So as we (multiple speakers) -- well, as we have been consistent, we are considering all of these options on a continuous basis. It is clear that we need to provide it clear in this discussion and in this call that we can make no assurances of anything, Brian, and exact timing is something that -- we cannot provide that information at this point in time.

Okay. And do you know what possible Marqibo sales would be if you were to get European approval?

There is -- it would depend on what the label would be. It would depend on results of pricing, research and it would depend on timing. So because of those variables, I cannot make a prognostication of that amount right now.

Okay, all right. And you said that you do have a price on Marqibo?

No, I have not said that.

No? Okay, all right. Thank you very much.

(Operator instructions) [Larry Lee].

(inaudible) can do for our Company.

Could you please repeat the question? It was breaking up a bit on the phone line.

What is (inaudible) [stock] can do for the Company (inaudible) to do?

I must apologize, but I really do not understand --

(multiple speakers) [regarding real high rolling stock to have us] -- to do something for a company. I don't know what they do for a company.

I apologize. All I can suggest is if you would like to send a question to Craig or to me via e-mail, we would be happy to try to address your question. I apologize.

Joe Shanela, Arena.

I forgot a question earlier. Given the indication, how many doses do you expect of Marqibo per year, given the approved indication?

Yes. So based on the labeled indication and extrapolating from the average number of doses that were used in our Phase II trial, we would expect that the average patient would receive 7 to 8 total doses of Marqibo. I do remind you, though, that in our Phase II trial there were patients that received up to 18 total doses of Marqibo as part of their treatment.

Okay, all right, thank you.

[Marty Platke], Private Investor.

What additional revenue did you say that after May that you would be out of funds? What is the plan for the Company after that?

Well, What we said was that in order for us to continue operating after it May that we would need to bring in additional (technical difficulty) and the different approaches that are typical sources of funding would include a strategic transaction, would include potential equity purchases or potential debt. So those are the different typical options we have in front of us regarding that.

Okay, thank you, guys.

I am not showing any other questions in the queue. I would like to turn it back over to Dr. Deitcher for closing comments.

Well, we appreciate everyone's excellent questions and your participation and interest in this call this morning. On behalf of the Company and, in particular, management and employees, we are continuing to work very hard and I think our past track record of this Company is clear that our goal is to have accomplishments, not just activity and we are going to continue to try to live up to that standard. We thank you very much and look forward to interacting with you in the future.

Thank you. Ladies and gentlemen, thank you for your participation in today's conference. This does conclude the conference. You may now disconnect. Good day.