Spectrum Pharmaceuticals Inc (SPPI) 2014 Q3 法說會逐字稿

Good day, ladies and gentlemen and welcome to the Spectrum Pharmaceuticals incorporated third quarter 2014 financial results conference call. (Operator Instructions) As a reminder this conference call is being recorded.

I would now like to turn the call over to your host, Shiv Kapoor, Vice President of Strategic Planning and Investor Relations. Mr. Kapoor, you may begin.

Good afternoon and thank you for joining us today for Spectrum's third quarter 2014 financial results conference call. I am Shiv Kapoor, Vice President of Strategic Planning and Investor Relations for Spectrum Pharmaceuticals.

With me today are Dr. Raj Shrotriya, Chairman and CEO, Joe Turgeon, President and Chief Operating Officer, Kurt Gustafson, Chief Financial Officer, Dr. Lee Allen, Chief Medical Officer, Tom Riga, Chief Commercial Officer, and other senior members of Spectrum's management team.

Here is an outline of today's call. First Dr. Shrotriya will provide you with the highlights of the third quarter and discuss our overall direction and strategy. Kurt will then provide a summary of our third quarter financial performance.

Following this Joe will review the Company's operations, and Dr. Allen will review the pipeline. We will then open up the call to questions.

Before I pass the call to Dr. Shrotriya, 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 product sales, profits and losses, the safety, efficacy, development, time line, and clinical results of our drug products and drug candidates 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, November 6th, 2014, 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, and other SEC filings, and other important information please visit our website at www.sppirx.com.

I would now like to hand the call over to Dr. Shrotriya.

Thank you, Shiv, and thank you, everyone for joining us this afternoon. We have been very busy at Spectrum and I am pleased with the progress that we have continued to make in the third quarter.

As you know we are working on a number of exciting anti-cancer drugs. However, today, we are going to focus our comments on highlights of this quarter and on near term goals.

First let me say a few words about the progress we are making in bringing new and novel drugs to cancer patients. At the beginning of this quarter we received accelerated approval from the FDA for our fifth anti-cancer drug, Beleodaq.

This approval came early, five weeks before the agency's planned PDUFA action date. We were quickly able to launch Beleodaq within three weeks after the approval. I am pleased to report that the early signs of the uptick of Beleodaq are encouraging.

Second we are now nearing the filing of the new drug application, or NDA, for our sixth anti-cancer drug Captisol-enabled melphalan. With the Captisol-enabled technology, melphalan is stable four to five times longer than the currently available formulation. Our drug is designed to meet the need for a formulation that is free of propylene glycol an excipient that has been associated with renal and cardiac side effects.

This drug fits well with our existing medical and commercial infrastructure, and we plan to file this NDA within less than two months from today.

Third, we reported that we had positive data from the phase 2 trial of SPI-2012, a novel long-acting Granulocyte Colony-Stimulating Factor, or G-CSF, and we are advancing the program into phase 3. We are now busy selecting investigators, finalizing protocols, and meeting regulating authorities both in the United States and Europe to discuss and receive their guidance for SPI-2012's expeditious regulatory approval.

We just had a constructive meeting with the European Medicines Agency on October 29th in London, and we are scheduled to meet with the FDA in December.

The process of getting ethical review committee approvals and investigators meetings, et cetera, is being planned to occur in Q1. Our plan is to start treating patients in phase 3 program in second quarter next year.

I believe that Spectrum's future has never looked brighter now that we have a later-stage drug that targets a blockbuster market.

Now a few words about business development and our base business. This quarter we out-licensed rights for greater China for three of our drugs to CASI Pharmaceuticals, a NASDAQ listed company focused on China. CASI was granted exclusive rights to two of our commercial oncology drugs, ZEVALIN and Marqibo, and a phase 3 drug candidate, Captisol-enabled melphalan.

In return, Spectrum received a 19.9% stake in CASI, and a $1.5 million promissory note.

China's pharmaceutical market is growing at a rapid pace and is already approaching second place to -- only to the United States. We were impressed with the management team at CASI and their expertise in China. And we now look forward to sharing in the success of our drugs in this important market through CASI.

Lastly I am delighted to see solid growth in our core business. Product sales surpassed $40 million for fifth consecutive quarter, and this is our third consecutive quarter of product sales growth. Overall we are very excited with the progress we have made and the future that lies ahead of us.

Our base business continues to be stable, and is strong and allows us to fund our future growth. The successful filing and launch of Beleodaq, the upcoming filing of Captisol-enabled melphalan, and the ensuing later-stage development of SPI-2012 demonstrates the progress we have made.

Additionally, we continue to evaluate out-licensing and in-licensing opportunities that can position us extremely well in the long-term. I am excited that we are at the beginning of a multi-year growth story at Spectrum.

Now let me hand over to the call to our Chief Financial Officer Mr. Kurt Gustafson. After Kurt, Mr. Turgeon, our President and Chief Operating Officer, and Dr. Lee Allen, our Chief Medical Officer, will provide you further details.

Kurt, please.

Thank you, Raj. And good afternoon to everyone on the call today. Our press release covers all the important figures so in my remarks I will touch on a few of the highlights of the quarter.

We are very pleased with the strong sales we had this quarter which continue to fund the operations of the Company. Total product sales were $47.9 million in the third quarter compared to $41.4 million in the same quarter last year, a growth rate of 15.6%.

Fusilev sales were $26.9 million in the third quarter, a 16.6% increase versus the same quarter last year. Wholesaler inventories remained stable this quarter so the reported sales figures are representative of the strong fundamental demand we have for Fusilev.

As you may recall, last quarter we had a one-time benefit associated with freeing-up of an inventory reserve, so while this quarter was up only modestly on the previous quarter on a reported net sales basis, the actual end user demand was up 12%.

This quarter we also launched Beleodaq. And just like FOLOTYN, Beleodaq is approved to treat patients with PTCL, but with each of these drugs having a unique mechanism of action.

Our goal is to grow sales for our PTCL franchise as we look to expand the market and gain share from our competitors. As a result the true measure of how well we are doing in this market is to measure the two products on a combined basis.

So if we take a look at the PTCL franchise, total sales were $14.7 million in the third quarter. This is an increase of 39% over last year and represents a 16% growth rate versus the previous quarter.

If we look at the individual products, FOLOTYN net sales were $12.7 million, and Beleodaq net sales were $2 million. FOLOTYN sales increased 20% versus last year and were flat versus the previous quarter.

However, recall last quarter FOLOTYN sales benefited from a change in our distribution model where we had approximately $1 million in one-time additional sales. So if you exclude this one-time wholesaler channel fill, the end user demand was actually up 7% versus the previous quarter.

Beleodaq was just launched at the end of July and is off to a great start. We believe approximately $1.6 million of the $2 million is end user pull through, while the other $400,000 represents the initial stocking at wholesalers.

In regard to our two niche products, ZEVALIN sales were $4.6 million, which were lower due to various market conditions, and Marqibo sales were $1.8 million.

We made a change this quarter in our revenue recognition practice regarding Marqibo. Now that we have sufficient history we are recording sales based on our shipments to wholesalers rather than waiting for pull through demand. This resulted in a one-time true up of approximately $400,000.

So if you exclude this one-time true up, Marqibo end user demand remains stable versus the previous quarters.

Moving on to operating expenses, total R&D expenses for the third quarter were $14.4 million as compared to $13.6 million in the same period last year.

On a non-GAAP basis, R&D expenses were $14 million versus $11.8 million last year. SG&A expenses for the third quarter of 2014 were $24.1 million, as compared to $29 million in the same period of 2013.

Last year was artificially high due to one-time costs associated with the Talon acquisition. On a non-GAAP basis, SG&A expenses were $21.3 million versus $20.5 million last year. Our Research and Development expenses will slightly ramp up as we begin SPI-2012 and other clinical studies next year.

However, we remain fiscally disciplined in our approach to funding these programs. On a GAAP basis, the net loss for the quarter was $11.5 million compared to a net loss of $7.8 million in the third quarter of 2013. While on a non-GAAP basis net income was $5.3 million or $0.08 cents per basic and per diluted share as compared to net income of $1.7 million or $0.03 cents per basic and diluted share for the same period in 2013.

We continue to have a strong balance sheet. Operating cash flow is strong and we ended the quarter with $148 million in cash and marketable securities.

So now let me turn the call over to Joe to provide an operational update.

Thank you, Shiv, thank you, Kurt, and Dr. Raj and thank you mostly to everybody on the call. I appreciate your interest in Spectrum.

Let me first provide you my perspective on our core business which now includes five drugs. A good indicator of our commercial strength is the quarterly performance of our products. As Dr. Raj mentioned this is the fifth consecutive quarter we?ve reported sales over $40 million and the second quarter in a row where we have realized revenue greater than $45 million with quarter-over-quarter growth driven by strong end user demand.

What you see in our revenue growth is a confirmation of the significant progress we are making to enhance our commercial capability and results. We aspire to be a consistent, credible, and dependable commercial organization, and our performance year-to-date, including the third quarter, is demonstrating we are indeed making good progress.

In Q3, Fusilev finished at $26.9 million which was driven by 12% quarter-over-quarter growth in end user demand. This performance is in addition to end user demand growing in every quarter throughout 2014.

The inflection in end user unit demand is specific to the community oncology segment. The significance of this fact is two-fold.

First, this is where 90% of our business resides. Second, if you look at our development assets in our future, it is critical to have an aligned partnership with the community oncology segment. Furthermore it has been more than 12 months since we established wholesaler inventory guard rails and we continue to be within those established guard rails.

As I have said in the past, 2014 will be a year where we gain a deeper understanding for what this product will consistently deliver. Our strategy is sound and the disciplined execution being demonstrated by our people is solid.

Spectrum is a leader in the PTCL franchise being the only company having two of the four products indicated for the treatment of these patients. We are a pioneer in the PTCL landscape.

FOLOTYN, our anti-folate, was the first drug approved for relapse or refractory PTCL in 2009, and our second product, Beleodaq, was approved under an expedited review process in July 2014.

As you know PTCL is a fatal disease. It is really difficult to treat. The most effective drugs in the setting provide only a 25% to 30% overall response rate. Those patients who initially respond usually fail treatment and progress within a year. Therefore these patients routinely cycle through several lines of therapy.

Dr. Raj mentioned that Beleodaq is also indicated for PTCL, the same patient population as FOLOTYN, but importantly it targets a totally different mechanism of action.

We have specifically focused our marketing efforts to educate physicians regarding the mechanisms of actions for these products. Given the natural history of PTCL, we expect that patients will likely need to receive both products at some point during their course of treatment.

Let me provide some context into our performance as it relates to our overall PTCL franchise.

As Kurt mentioned earlier we have grown our PTCL business by 16% quarter-over-quarter. FOLOTYN demonstrated quarter-over-quarter growth driven by a 7% increase in end user demand.

The $2 million in revenue for Beleodaq is a positive signal that the market recognized the clinical value and it validates the FDA's decision to approve Beleodaq ahead of its already expedited review.

There is a clearly an unmet medical need with this fatal disease and we are pleased that patients can benefit from this new treatment option. We are optimistic with the revenue, our engagement with KOLs, and our focus will be on disciplined execution and increased breadth of customer base to gain experience with the product. It is still very early in the Beleodaq launch trajectory and we will keep you updated on the progress.

The PTCL franchise is the second largest contributor to our underlying revenue and demonstrating double digit growth in our PTCL franchise, demonstrates that our commercial efforts are bearing fruit as we compete intensely in this competitive market place.

For Marqibo, sales in the second quarter were $1.8 million with stable end user demand. Let me remind you that the current indication is adult Philadelphia-negative relapsed refractory ALL, that?s a niche indication with approximately 1,600 adult patients per year in the U.S.

We believe the potential of Marqibo could be significantly beyond the current indication. Marqibo is a novel liposomal formulation of vinCRIStine, a drug that?s well established in the treatment of multiple hematologic and solid tumor types.

The long-term growth potential for this product will be driven by our ongoing research efforts and the study of possible expansion of the current indication into broader ALL and NHL settings.

Let me share with you one of our highest priorities in the Company, SPI-2012, our novel long-acting G-CSF, which Dr. Allen will discuss in detail shortly. SPI-2012 is an opportunity that has the potential to change our growth trajectory of our Company. As you know we have made the decision into move to phase 3 trials following the positive phase 2 data.

We are currently gathering feedback from regulatory and scientific avenues globally, which will quickly be followed by phase 3 initiation. We expect to showcase the phase 2 data from SPI-2012 at a major medical conference next year, most likely ASCO.

Last week we had a construction discussion with EMA, and we have already received their written comments. In December we are scheduled to meet with the FDA to finalize our global phase 3 program. If the phase 3 trials confirm the phase 2 success we believe SPI-2012 is giving us a real chance to compete in a blockbuster market.

At Spectrum we're in a strong position to execute our mission to redefine cancer care. Our core business is growing, that gives me confidence that we will be able to realize the promise of our pipeline and deliver shareholder value. I've just walked you through our current portfolio of products. Let me stress the unique and desirable position that this portfolio puts us in here at Spectrum. It is providing great cancer treatments to deserving patients in need of help.

They are covering our expenses and spends, placing us slightly better than break even. They place us in a unique, strong cash and financial position. They are funding our future with near-term products including potential blockbusters. They are allowing us to attract, hire, and retain top industry talent.

We now have a formidable commercial team that is demonstrating results, top notch manufacturing, quality, finance, HR, medical department, medical affairs department, IT, and virtually every department at Spectrum. I am extremely proud of our people and our Company is essentially only as good as the players that we put on the field.

Finally, this portfolio allows our model of acquisitions to continue and thrive. We continue our aggressive business development activities to uncover additional opportunities to move our Company forward. I am confident in our future through this unique and desirable position.

I would like now to pass the call over to Dr. Lee Allen, our Chief Medical Officer.

Thanks, Joe and good afternoon to everyone on the call.

We continue to make good progress on aggressively advancing Spectrum's exciting cancer portfolio and further building our infrastructure and operational efficiencies.

Today I will provide you with a brief update on two of our exciting and most advanced clinical development programs for Captisol-enabled melphalan, and SPI-2012, our novel long acting G-CSF. Our team is very focused on finalizing all of the documents required for the Captisol-enabled melphalan filing to FDA, which we plan to submit by the end of the year.

We believe that the improved drug's solubility and stability of this novel melphalan formulation will make it an attractive treatment option for both transplant conditioning and the palliative treatment of patients with multiple myeloma.

Eliminating the need for propylene glycol in the preparation of Captisol-enabled melphalan eliminates the risk of the toxicities that are associated with this excipient.

In addition, Captisol-enabled melphalan's increased stability simplifies the logistics for pharmacies and also allows for longer infusion times which may permit the administration of higher dose intensities.

Captisol-enabled melphalan met all it's endpoints in phase 2, and our discussions with the agency have been very positive. We expect the FDA review to take around 12 months which is the norm for a 505(b)(2) application.

So a decision on the approval of Captisol-enabled melphalan is expected by the end of next year. For SPI-2012, our long acting Granulocyte-Colony Stimulating Factor, the phase 2 dose finding study has been completed and we are preparing to lock the database.

As we have discussed, we are very excited about the specifically engineered G-CSF because of its high potency, long half life, and targeted delivery to the site of action, the bone marrow, which occurs because of the unique protein carrier used in the LAPSCOVERY technology.

This technology leads to greater bone marrow penetration and has several important advantages over pegylation, which is the process used in the only currently approved long-acting G-CSF in the United States, pegfilgrastim. As Joe mentioned earlier, we had a very constructive meeting with the EMA and they have expressed their interest in this novel product.

In addition, our end of phase 2 meeting with FDA has now been scheduled in December of this year. We plan to aggressively drive the clinical development of SPI-2012 as our top priority, and have already drafted the phase 3 protocols, and started identifying study sites.

In Q1 we will be finalizing these study protocols and site contracts, and expect to be well positioned to start treating patients in the second quarter of next year.

Spectrum is very fortunate to have such a robust pipeline with a lot of promising compounds that we are aggressively developing. We plan to continue to meet or exceed each of our project milestones, and consistently drive the development of high quality products and label expansion programs that positively impact the lives of cancer patients.

I will now turn the call back to Dr. Raj.

Thank you, Lee.

We are very pleased with the third quarter results as I believe it reflects our significant focus on our core business and a strong management at Spectrum. With five drugs on the market we are becoming a leader on oncology and building a diversified company.

In less than two months we will submit the next NDA for Captisol-enabled melphalan. We plan to start enrolling patients in phase 3 trials for SPI-2012 in second quarter of 2015. I am proud of our various teams that are executing so well, and I believe we are well positioned for growth. I also believe Spectrum is at the beginning of a multi-year growth story.

I would now like to open the call for questions.

Thank you. (Operator Instructions) Our first question is from Adnan Butt with RBC Capital Markets. Your line is open.

Hi, everybody. Thanks for taking the question, and nice job on the solid execution here.

I have two questions, first a commercial one. Could you say what is driving demand growth for Fusilev? Is it more doctors using it, or is it basically seeing more usage across a number of patients?

And then secondly on Beleodaq, or just the PTCL franchise, do you see the same offices using both drugs at this time? Or is Beleodaq basically giving you penetration in additional doctors' offices? That's the first questions.

Adnan, let me have our Chief Commercial Officer, Tom Riga, answer those questions.

Hey, Adnan, how are you? Thanks for the question.

First regarding Fusilev. I think the answer to that comes first to people. The team that we have on the field with Fusilev, they are formidable, they've been in this space and they're executing exceptionally well.

If we look at what is driving that, there was a 12% growth in end user demand driven purely where we are focused in the oncology space. It is representing 90% of the business. And those partnerships in alignment we have with community oncology is bearing fruit.

To your second question regarding the PTCL franchise, we are thrilled to have our second product in PTCL. It puts us in a leadership position.

We are leveraging our commercial infrastructure, it gives us more share of voice with the customers. And when we look at the use of Beleodaq it is really a mix and it depends on how the customer is treating these patients knowing that they are going to cycle through products.

So FOLOTYN's growth, the 7%, came from increased new customers and Beleodaq is both in the HDAC space where we're competing intensely, and also customers who have used FOLOTYN in the past. So, I hope that?s (technical difficulty).

That's helpful, thanks. If I can get a pipeline question, please. So when do you expect to have the protocol finalized for SPI-2012? And are approval criteria pretty uniform in the U.S. and outside the US?

Adnan, I let Dr. Lee answer this question, but before he does, keep in mind that we have already drafted protocols, sent them to the FDA and the European agencies. We want to make sure that when we run this program that there's a buy-in from the authorities who will make the decision to approve this drug.

So maybe Dr. Allen, you can talk (inaudible).

Sure, happy to add a little bit more color to that.

So again, we are waiting for a feedback back from the agency on these specific protocols. So they will be finalized after we complete our discussions with the agencies.

I think Dr. Raj commented during his talk about the reaction that we've had from the EMA, very positive reaction. We look forward to our dialogue with the FDA in December. So we will finalize the sales very quickly.

Our goal is, again, to be able to immediately trigger these studies and get them enrolled as promptly as possible.

As far as approval criteria, I think for this indication it's pretty consistent, US and ex-US. For some other cancer indications, there are differences based upon the standard of care, but here I think that we'll be able to have a very comprehensive global program.

So, Adnan, I will just add one comment.

The development of the G-CSF is really a very exciting opportunity for any anti-cancer company. Because unlike other drugs where we have to wait for overall survival for years or for progression-free survival for years, in this case after 10 days you measure the white blood cell count, what's called ANC, or absolute neutrophil count, and you basically have your endpoint.

So we are very excited about this program, and we're so excited that we can run this program based on our phase 2 data rather quickly.

The second aspect of my excitement is that FDA has already approved a drug in this space. So there is a program that has already been laid out. In other words there is a historical perspective that drugs like Nulasta and Neupogen were approved by the FDA.

We know their label and we know the kind of studies they did. So this is a very clear cut outcome in our anti-cancer space. The sales of Nulasta are $4.8 billion in the United States. Worldwide sales are over $5 billion, close to $6 billion. So we are very excited to have a cutting edge technology in this space.

Dr. Raj, I think you mentioned that the trials start enrolling in the second quarter next year. When do you think we might get some time line parameters?

Adnan, That's too soon. I wish -- just wait. I think once we have made it with the FDA, once we have started this program, you will be the first one to know how we are doing and when we expect the outcome.

Thanks, everybody. Congrats again.

Thank you. (Operator Instructions) Our next question is from Ren Benjamin with H.C. Wainwright. Your line is open.

Hi, good afternoon guys, and thanks for taking the questions and congratulations on another great quarter.

I guess just a couple of questions. One, again with 2012, can you give us just any color on what went into making the go, no-go decision? I know we're supposed -- they were positive results, but just can you give us any sort of a sense as to how positive?

We have speculated that the phase 3 trials that will be run would be non-inferiority studies. Does that seem reasonable? Any sort of guidance you could give us?

I will ask Dr. Lee to jump in, but before he does I would just like to give you my perspective.

Ren, we completed phase 1 trials and in those trials we had used Nulasta as a control arm in addition to placebo. And we found -- so we did a dose response study. Dose response is studies using three different dosing regimens of SPI-2012, and Nulasta as a proven dose, and placebo.

And we were looking for making sure that the final product that we have at what dose, what effect do we have on absolute neutrophil count. And those were the criteria we were waiting to see. This drug is given subcutaneously as you know. It is an injection that is given subcutaneously. So it is a amount of volume of 0.6ml, is the usual volume that is given.

So we wanted to make sure at what dose will be the most appropriate dose for this drug. So once we completed phase 1 studies, we acquired the rights to this drug during phase 2 trials. We've now completed phase 2 trials, and waited for those trials to be completed.

We looked at data in about 150 patients given four courses, three doses of Spectrum's drug and one dose of Nulasta, and then we made a decision to move with the phase 3 program.

Dr. Lee would you like to add some?

Sure, sure. Yes. So, of course we are really waiting to release the data at a scientific forum, we think that is the most appropriate place to provide that first data release.

That said, of course, what we've looked at is the data that is in our hands, and based upon that data made a decision to move forward. I can say with confidence that we expect our product to be at least non-inferior to the competitor products.

Obviously we will wait for the final design of the studies until we have our discussions with the FDA. But I think that's fair to say at this point.

Got it. Okay. And in terms of maybe a strategic plan for growing the sales of either Fusilev or the other marketed products, could you take us through short of sort of the brute force sort of sales approach? Is there more of a clinical -- a running clinical studies approach that could potentially increase, let's just say, for example, Fusilev's potential?

Because I know at one point you guys were thinking along the lines of combining Fusilev with FOLOTYN, if I remember right because maybe you had seen some pre-clinical results that beneficially affected oral mucositis, but I could be remembering wrong.

Do you have any plans that are in place now that would utilize clinical studies and combinations of the drugs you already have to drive market share?

Well, Ren, let me first talk about our strategy.

Our strategy at Spectrum is really to -- the revenue that we have from the drugs -- we're not a revenue company at this stage. Our revenue at this time is designed to fuel our blockbuster potential drugs.

So I don't want anybody to focus on the revenue of each of our drugs. We have been building a diversified portfolio company so that our risk is minimized from any one drug, but at the same time, give enough revenue that can fuel our blockbuster drugs.

SPI-2012 is the first drug that I would say has the potential in our hands of being a multi-billion dollar market in which it will participate.

So that is the -- you talk about strategy, so that's where the strategy comes from at Spectrum. For your second part of the question, I'll have our Chief Commercial Officer, Tom Riga, talk about it.

Yes, I think tying right onto that, our commercial team takes great pride in being the fuel that generates the revenue that will lead to tomorrow's blockbuster.

And for us to demonstrate commercial excellence and disciplined execution we have to invest in the development of our people from a sales training perspective, and apply analytics to guide our activities which is exactly what we are doing.

So all indications are positive and our team is focused on the right places to incrementally grow our base book that will fuel the promise of tomorrow.

Okay. --

Let me add a little on top of that in terms of the combination study. So we certainly are looking very carefully across our portfolio being that it is so diversified in terms of opportunities to combine our drugs in a way that may be synergistic.

For Fusilev and FOLOTYN we do believe there is potential synergy in terms mitigating the side effects of FOLOTYN treatment with mucositis. However, from a practical administration perspective, the IV formulation was not ideal for that. I think we talked about that when we did change our strategy, and that we are pursuing an oral mucositis study using leucovorin itself, so oral tablets.

So yes, we are pursuing opportunities to improve the side effect profile that might translate into better use in the market place.

And, Ren, I will just add that every product no matter how big or small we have a life cycle plan for. And sometimes we change that to move it forward. It can be anything from generating data, potentially getting new label expansions, et cetera, combination therapy. So absolutely we have a life cycle plan for every product.

And Ren, in oncology, the exciting part of PTCL franchise is that the responsive rates of all the drugs is 25% or so. We now have two drugs with totally different mechanism of action and totally different toxicity profiles, FOLOTYN and Beleodaq.

One is an HDAC inhibitor and one is a (inaudible) analog. When you combine the two -- these two drugs my expectation is like in oncology you combine many drugs so you reduce the toxicity and increase the efficacy of those drugs.

So I am hoping once we can do a trial where we combine Beleodaq and FOLOTYN we might be able to achieve a better response rate. That is purely and a (inaudible) this time, but certainly an opportunity for both of our drugs.

But just then to add to that, we do have some pre-clinical data with that combination that does show some synergistic effects, so there is a scientific rationale as well.

Excellent. Excellent.

And I guess just another question in regards to the sales strategy, and it's just more from a pricing perspective. When do you guys expect to -- I know that you guys adjust and increase the price of the drugs that are currently being marketed I think either on a yearly basis or maybe twice a year. Can you just maybe give us a sense as to when the next price increase may go into effect?

I will ask for Tom to talk about this.

So we have put a plan in place to have a pro-active and prospective price strategy. If you look at our historical behavior in 2014 they have been bi-annual and that -- we will look to continue that.

Got it. And then I hate to say this on a public call, but I [bunked] with my earnings estimate for you guys because I threw in a $25 million payment to Topotarget upon the Beleodaq approval, and I didn't see it, unless I missed it, on the reported earnings.

So maybe, Kurt, did I miss hear this or did we not have to make a $25 million payment? What happened to that?

So we absolutely do owe $25 million to Topotarget based on the milestones, but the payment terms of that were structured such that it wasn't due until a number of days after the end of the quarter.

So that is a payment that we will make in November. So I think if you take a look at our accounts payable line you will that number is a little inflated this quarter because it includes that -- the accrual for that payment, which will be made in the fourth quarter.

Okay. So -- and that will just flow through the P&L I assume in one of the -- either R&D or the SG&A line?

(technical difficulty) and amortized through the -- just similar to the way we amortize the rest of our upfront payments for our other licenses.

And, Ren, that also tells you how visionary we are when we cut these kind of deals. When we made a deal with Beleodaq in 2010, February 1st of 2010, when they wanted a milestone of $25 million on NDA approval we said, "We will give you that milestone one quarter after the FDA approval." This is why the approv -- the approval came in July and we were able to pay this in November of the fourth quarter.

And the reason for that is we wanted to make some money once the drug has been approved before we pay this money.

Excellent. I would not want to be on the other side of your negotiating table. But thank you guys very much, and good luck.

Thank you. And I am not showing any further questions at this time. Dr. Raj, please proceed with further remarks.

In closing I would like to thank you again for joining us on this call today, and your interest in Spectrum. We believe our growth story is just starting at Spectrum.

Based on our current products portfolio, a strong financial position, robust pipeline, and active business development we are in a formidable position to further growth.

We look forward to the future and continuing to meet the needs of cancer patients. Thank you.

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