Spectrum Pharmaceuticals Inc (SPPI) 2020 Q2 法說會逐字稿

Good afternoon, ladies and gentlemen, and welcome to the Spectrum Pharmaceuticals Second Quarter 2020 Earnings Call. (Operator Instructions) I would now like to turn the conference over to your host, Mr. Kurt Gustafson, Chief Financial Officer of Spectrum Pharmaceuticals. Please go ahead.

Thank you, operator, and good afternoon to everyone. Thank you for joining us today for Spectrum Pharmaceuticals Second Quarter 2020 Financial Results Conference Call. Our second quarter financial results press release was sent out earlier this afternoon and is available on our website at www.sppirx.com. Joining me on the call today from Spectrum Pharmaceuticals will be Joe Turgeon, President and CEO; Dr. Francois Lebel, Chief Medical Officer; and Tom Riga, Chief Operating Officer.

Before we get started, I would like to reference the notice regarding forward-looking statements included in today's press release. This notice emphasizes the major uncertainties and risks inherent in the forward-looking statements that we will make this afternoon. These statements are not guarantees of future performance, and undue reliance should not be placed on them. Such forward-looking statements necessarily involve known and unknown risks and uncertainties, which may cause actual performance and financial results in future periods to differ materially from any projections of future performance or results expressed or implied by such forward-looking statements.

With that, let me hand the call over to Joe Turgeon, CEO of Spectrum.

Thank you, Kurt, and good afternoon, everyone. Thank you for joining us on the call today. It's been quite a year already, and we're even more excited about what's to come in the second half. We've made some great progress and continue to rapidly advance our development pipeline despite the challenges of the pandemic. And speaking to that, I want to thank our dedicated employees who have remained focused on the advancement of our clinical development programs. And in addition, investigator interest in our pipeline remains strong as we pursue new solutions for cancer patients and for health care professionals.

Let me turn to some brief updates of our programs. In late July, we announced that poziotinib met the prespecified primary end point in cohort 2 of the Phase II ZENITH20 clinical trial. The success of this cohort is a significant achievement for spectrum and for the patients with this devastating disease. There is no approved therapy for patients with HER2 exon 20 insertion mutations, and we're looking forward to meeting with the FDA. Dr. Francois Lebel, our CMO, will provide a discussion of the cohort 2 results on the call later today.

ROLONTIS, our most advanced program, is under active review at the FDA for the treatment of chemotherapy-induced neutropenia with a PDUFA date of October 24, 2020. If approved, ROLONTIS could be the first novel granulocyte colony-stimulating factor available to health care providers in over 15 years. As the PDUFA date approaches, our launch preparations for ROLONTIS are accelerating. I look forward to getting back into this market, an area I know well personally and the potential of competing in this multibillion-dollar growth factor market. Tom Riga, our Chief Operating Officer, will have more to say on this later in the call. And then finally, our CFO, Kurt Gustafson, will go through the financial numbers.

Overall, I believe that Spectrum is well positioned to drive its late-stage product development assets forward, and we have the team and the necessary financial resources in place to advance these programs. We can reenter the commercial arena and achieve our long-term goals. And with that, I want to turn it over to Dr. Francois Lebel, our CMO, for an update on our clinical development progress.

Good afternoon, everyone, and thank you for being on the call today. Our recent announcement of a positive outcome for cohort 2 of the ZENITH20 clinical trial is an important achievement for lung cancer patients with these mutations and for our Spectrum team. We are thrilled with this outcome. It is exciting progress since there is no approved treatment for patients with HER2 exon 20 insertion mutation in non-small cell lung cancer.

The ZENITH20 cohort 2 enrolled 90 patients, and it is the largest prospective multicenter trial ever conducted in this patient population with over 70 participating sites in the U.S., Canada, Israel and Europe. Patients received a 16-milligram once daily oral dose of poziotinib given in a 28-day cycle. All of the patients had failed at least 1 line of prior systemic therapy and 60 patients had failed 2 or more prior therapies, including chemotherapy and immunotherapy. The primary end point was objective response rate as defined by RECIST 1.1.

Secondary end points included duration of response, progression-free survival and disease control rate. The intent-to-treat analysis demonstrated an ORR of 27.8%. The observed lower bound of 18.9% exceeded the prespecified lower bound of 17% with a 95% confidence interval. At the data cutoff, with a median follow-up of 8.3 months, the responses were durable with a median of 5.1 months, with some patients continuing to receive drug after 1 year.

Progression-free survival was 5.5 months with a disease control rate of 70%. The safety profile was in line with the type of adverse events seen with other second-generation tyrosine kinase inhibitors and was similar to what we saw in cohort 1. We plan to present additional safety and efficacy data for cohort 2 at an upcoming medical meeting later this year.

I'll remind you that cohort 2 was designed to be a registrational trial. We are in the process of requesting a pre-NDA meeting with the FDA based on these positive results to seek an indication for the treatment of patients with previously treated locally advanced or metastatic non-small cell lung cancer with HER2 exon 20 insertion mutations.

Now let me review where we are with the additional cohorts in this trial. Top line results for both cohort 1 and 2 have now been reported. And we expect to report the results from cohort 3 by the end of this year. Several months ago, we made dosing modification to the other cohorts in the ZENITH20 study. Our expectation is that one of these new dosing paradigms may minimize dose interruption, dose modification to potentially further enhance antitumor activity. We remain very optimistic about this program and look forward to updating you in the future.

I will now turn it over to Tom for an update on ROLONTIS.

Thanks, Francois. Our PDUFA date is just over 2 months away. We are actively engaged in our commercial build-out, and we would like to provide an update on the market opportunity and the progress we are making in our preparations for launch. First and foremost, we are ready and look forward to competing if approved. We are investing a great deal of time, effort and research into our strategy and plan of execution.

Let me begin by sharing with you a perspective on the long-acting G-CSF market. This market represents a compelling opportunity as it is still a $3-plus billion market despite several biosimilar entrants. Customers have demonstrated a willingness to change, and there remains ample opportunity for a new entrant, especially a novel product like ROLONTIS. In addition to the deep market knowledge we have within the company, we have done a great deal of qualitative and quantitative research to understand what ultimately drives customer behavior.

Let's start with safety and efficacy. The Phase III program for ROLONTIS demonstrated safety and efficacy that was non-inferior to pegfilgrastim in over 600 patients with a primary end point of cycle 1 duration of severe neutropenia. While our head-to-head studies were designed to prove non-inferiority, it does not mean that these assets are the same. There are notable clinical differences that will be important considerations for customers.

Severe neutropenia is viewed as a precursor to FN risk and associated complications. We know that for patients who have severe neutropenia, it most often occurs in the first cycle. We also know that for each additional day of severe neutropenia, a patient's risk of hospitalization increases by 30%. When looking at the results from our head-to-head Phase III program, ROLONTIS was effective at minimizing severe neutropenia in the first cycle.

Additionally, the safety profile was comparable to that of pegfilgrastim. The results of our advanced trial are now available in the most recent edition of The Oncologist, and the results from the identically designed RECOVER trial are now available in Cancer Medicine. This data highlights the impact of ROLONTIS on neutrophil activity, the potential benefit for patients and the value of a novel product in this space, the first in over 15 years.

In addition, a novel product like ROLONTIS enables continued development to achieve its full potential. The details of our preclinical and clinical findings offer a platform to enhance customer awareness prior to launch. There are 19 articles and abstracts published, presented or peer-reviewed across a range of scientific forums.

Additionally, our development program had over 100 U.S. sites, which increases KOL familiarity with the product's clinical profile. Furthermore, we continue to invest in this asset and maximize its potential as a novel product. We recently announced the initiation of a trial looking at ROLONTIS in the same day as chemotherapy. We believe ROLONTIS may be uniquely suited for this type of administration, and we are excited to learn more.

As we look at the market today, we are seeing important developments. Although there are several biosimilars available, they are competing with rational pricing. There is a perception that biosimilars are offering deep savings to customers in the health care system. However, the data suggests something different. Despite a significant difference in list price, the current pricing in the market reflects much less variation among competitors.

Based on average selling price, or ASP, which is a better measure of true market cost and list price, biosimilars are only offering a discount ranging between 0% and 8% versus Neulasta. There is also a perception that the lowest cost option will dominate the market. However, what we have seen to date is that the lowest price does not dictate share.

Currently, the biosimilars represent approximately 27% of the overall market. Within the biosimilar space, one product commands 74% of the business and has consistently been priced at a premium to the other biosimilars by an average of 5% since launch. If this market were behaving like a typical generic market, one would expect that the first entrant and the lowest-priced product would command the higher share.

However, we are clearly seeing that this is not the case, suggesting that the long-acting G-CSF market is still behaving as a brand-driven market. These pricing dynamics, along with CMS coding and reimbursement changes, provide an opportunity for a novel product like ROLONTIS.

ROLONTIS will have a unique J-Code that allows for unilateral control over its total reimbursement. The reimbursement for biosimilars is a function of the innovator price, in this case, Neulasta. This ties them together and creates a pricing dynamic, which they can't control on their own. It also causes a lack of predictability for customers in a high utilization drug category.

On the other hand, with ROLONTIS, we will have total control over our pricing decisions, which will offer customers a stable and predictable reimbursement. We will be able to act independently with regard to discounts and rebates to manage reimbursement through ASP without reference to an innovator product. We see this as a competitive differentiator.

As we look at the customer landscape, there are really 3 key segments: clinics, 340B hospitals and non-340B hospitals. Each of the 3 segments has unique characteristics to consider. Most notably, the clinic segment reimbursement largely influences adoption and this segment is responsive to tailored contracting. There is a strong value placed on ASP stability and predictability, along with high utilization of patient access and support programs. We are intimately aware of the differences by segment and have a tailored strategy that enables us to compete across all of them.

Payers are also playing a very important role in this market, and we are actively engaging them. Through this engagement, we understand that the majority of the time, providers still hold the decision-making power. That being said, payers are undoubtedly increasing their influence in this market, and our team is ready to partner to ensure ROLONTIS is an available option.

Regarding the commercial team, we have begun to build a competitive and fully integrated commercial infrastructure to support the launch of ROLONTIS. Our team has a deep understanding of oncology and supportive care. Once fully staffed, we will have a team of approximately 60 commercially focused FTEs within sales, access and reimbursement, marketing, commercial operations and medical affairs. We currently have 21 of our team members already on board.

In closing, we are ready to compete. We have all the ingredients to do so, and we look forward to the PDUFA date in October. With that, I'll turn the call over to Kurt to review the financials.

Thanks, Tom. Our SG&A expense for the second quarter of 2020 was $14.7 million versus $17.2 million in the previous year. R&D expense was $21.7 million versus $17 million. The increase in R&D expenses relates primarily to purchases of ROLONTIS drug substance as we prepare for the launch of this product as well as higher clinical costs associated with poziotinib clinical trials.

We expect to make additional ROLONTIS inventory purchases in the third and fourth quarters of this year. Recall that the accounting rules require us to expense this inventory as R&D expense until the product is approved. But when we actually sell this inventory, it will be reflected at a 0 cost of goods.

Our net loss for the quarter was $32.1 million versus $28.4 million in the comparable period in 2019. And on a non-GAAP basis, which primarily backs out stock compensation costs, our loss for the quarter was $31.8 million versus $25.2 million in the prior year period.

The overall change in cash and marketable securities for the quarter was $21 million. Operating cash burn, which is a better measure of our actual cash outflow, was $27 million for the second quarter. This is consistent with operating cash burn in the last few quarters. We ended the quarter with $157 million in cash plus marketable securities. This cash balance does not include any of the proceeds from our financing in late July that raised a net $82 million after deducting commissions. This amount is a combination of the proceeds from our underwritten public offering and sales under our ATM facility, which we utilized the day after we announced the results from cohort 2.

If you were to add the $82 million to our Q2 cash balance, we would have a pro forma cash balance of $239 million. This provides us with plenty of runway to continue the development and commercialization of our late-stage assets.

With that, let me hand the call back over to Joe.

Thank you, Kurt, and thank you, Tom. Thank you, Dr. Francois. I think you can see from everyone's remarks that Spectrum continues to make outstanding progress on our pipeline and our commercial build-out in anticipation of potential approval and launch for ROLONTIS. I'd like to thank our entire team for their hard work and the dedication in these unprecedented times.

And with that, I'd like to open the line for questions. Operator, if you could open up the lines for questions, I'd appreciate it.

(Operator Instructions) We have your first question from Maury Raycroft from Jefferies.

Congrats on the updates. I think you guys have been asked this on other calls in a couple of different ways. But just for poziotinib, wanted to dig into the prespecified 17% number a little bit more again. And so I'm wondering if you can provide more background and thoughts on the assumptions that went into that prespecified 17% ORR number for pozi and how this was established with FDA?

Francois?

Sure. Yes, Maury, good to speak with you. So the discussion, obviously, derived from a review of the literature. And as you know, there is no approved drug for HER2 exon 20 mutation, but there is a number of reports in the literature giving us some guidance.

Now in large part, these -- the data that's in the literature is usually a small number of patients, retrospective analysis, very small number of patients at one site, et cetera. So that's how it was arrived. After reviewing this information, there was a discussion with the FDA. And then various calculation were established as a -- that what would be our prespecified end point, obviously, communicated with the FDA and eventually finalized in a statistical analysis plan.

So that's -- I hope that answers your question. And you probably will ask it, was the HER2 one specific for HER2? And the answer is yes. It was -- the literature is a little different than the EGFR data.

Got it. Yes, that's a helpful additional perspective. And then we're guessing that FDA will likely want you to resolve some of the differences in data that you're seeing in cohort 1 versus cohort 2. And you guys talked about this on the last conference call and some of the ideas on how you could resolve this with explanations.

And so I'm just wondering if, I guess, how are you thinking about this? And is there a plan in place to address some of the differences that you're observing between cohort 1 and cohort 2 in the pre-NDA meeting?

Yes, you're absolutely right. We obviously expect that we'll need to provide some explanation or rationale to explain the result. And as I've indicated, I think, last time, the obvious one is that there's a different receptor at play here. We don't think that, that's necessarily the main difference. We believe that the investigator had gained experience with the drug by the time they were doing -- enrolling patient in a year or 2. So that could explain in part some of the results.

There's ongoing analysis here. So we're looking for, are there country difference, investigators, site difference, et cetera, the use of concurrent medication. So all of those factors are being looked at as we speak.

There's a possibility that the number of sites in cohort 2 coming from any particular region could be different. Comorbidities, I mentioned. So all of those factors are being analyzed, and we intend to present that information, obviously, to the FDA. So I hope that answers your question.

We have your next question from Alethia Young from Cantor.

This is Li on for Alethia. Just as a follow-up for your FDA meeting. Can you give us any examples of similar situation where a drug sort of worked in one cohort but not in the other and what was the outcome? And then maybe just talk about what kind of preparation and analytical work are you currently doing, try to sort of frame this association to FDA?

Yes. I mean, I -- off the cuff, I can't give you an example, but I think, potentially more importantly, you've got to recall that we had an agreement with the FDA that -- and we've communicated that to the Street that all of our 4 cohorts were independent of one another. So what that means is that if one is positive and the other one is negative, that's fine, that was taken into account. And as I've indicated, there's a number of reasons that we're looking into to explain those difference.

So given that it was the, if you want, pre (inaudible) way, we think we're in reasonable shape and that's the fact that the EGFR one did not quite meet the end point, should be acceptable to the FDA. I want to remind you though that we had seen clinical activity there. So it wasn't kind of there was no activity in EGFR. It had not reached the required response rate that we had prespecified, but there certainly was evidence of an active drug here.

Okay. Got it. And then, is there any hypothesis around whether it might be easier or harder to see maybe more activity in a frontline patient versus maybe relapsed or refractory patient?

Yes. The -- and we have indicated previously that the bar in first line is higher. We've not disclosed the bar. But -- and if you look at the literature, that -- I think that's pretty well accepted that in first-line patient, respond better to this drug, in part possibly because they have more bone marrow reserve, they have generally better protoplasm, meaning their liver, their kidney, all their organs are in better shape, not having received multiple rounds of either chemotherapy or other forms of therapy. So we would expect first line to probably perform better, but the bar for our prespecified end point is also a little higher.

We have your next question from Ed White from H.C. Wainwright.

So maybe one last one for me on pozi. When you discuss the data from the cohort 1 patients, 88% had dose interruption and 68% had dose reductions. Any thoughts of going back and revisiting this patient cohort? I know you're -- with the different dosing schemes that you're trying out to try to get the patients to stay on there and address these second line and third line patients. And then I have a follow-up question.

Sure. So you've got a good memory. So the only guidance we have given -- because the analysis in cohort 2 right now is ongoing. But we've indicated that the number -- the side effect profile was quite similar to cohort 1 and in line with the class. So we're obviously looking at that.

And as I have suggested in my prepared statement, we were anxious to look at the data and get more data, looking at the different dosing, meaning, as you probably remember, we have a cohort at 10 milligram -- or sub-cohort, I should say, 10 milligram, 12 milligram and 6 and 8 BIDs. So we look forward to get that data.

Given the half-life and given the modeling we did, we anticipate that we should be able to improve the tolerance as well as potentially the antitumor activity. So unfortunately, that's all I can tell you today, and we look forward to getting that data in the near future so that we can share with you these new results.

Great. And then just switching gears, I had a question on the FIT Platform. You haven't talked about it in a while, and I was just wondering if you can give us an update on the Phase I. I think you had said you were looking at up to 20 patients there.

Just wondering, with COVID, if you've had -- how the enrollment is going there and what we can expect to see from the FIT Platform. And also if there's -- now that you have this increased cash on the balance sheet, if there's other BD opportunities you're thinking about pursuing?

So let me divide your question in 2. First of all, on FIT, as you can imagine, we're heavily focused on ensuring that the question that the FDA has for us on ROLONTIS are addressed in high priority as well as now the focus on pozi and getting to a pre-NDA meeting and conducting numerous analysis so that we have a good meeting.

The FIT program continues. It has been impacted, like some of our other program, by the pandemic. And we hope to give some additional guidance before the end of the year. But we -- at this point, I don't want to venture in that area right now other than to say, our late-stage program take priority. We're making progress. But I can't or won't give any further detail today about FIT.

Ed, I'll answer the second part. Certainly, Tom and his team, extremely active BD, business development program. So not a week goes by that we're not looking at different assets that make sense for our company and move the company forward. So absolutely, we are doing that on a very aggressive basis.

We have your next question from Michael Schmidt from Guggenheim.

I just had a follow-up on the HER2 study, cohort 2. I guess how are HER2 exon 20 mutated patients treated today as standard of care? And are they treated differently than wild type, I guess, lung cancer patients are treated?

Yes. So as you know, there's no approved treatment. There is various guidance that's been provided. In general, these patients usually see in second line or in first line who receive a combination of chemotherapy with -- often with a checkpoint inhibitor and/or a triple combination of chemo and HER2 immunotherapy with checkpoint. So we have not provided information about the patient makeup in our study, but it's quite typical to what is seen and used in treatment of those patients in the second line.

Okay. And what do we know about the prognosis of those patients relative to all-comers non-small cell lung cancer patients?

Yes. So the -- as I said in one of my earlier remark there, there is no approved drug. The literature is sparse, but is -- and not uniform, if you want. There are -- depending on what study you look at or data that was published, if you look at relatively large multicentric data that was put together, there is 2 consortium. There's a U.S. consortium and a European consortium that have looked at this.

And second line, obviously, there is some variability, but you're looking at something in the mid-teens usually for a response rate. I think the data in the literature overall, though, does confirm that patient with exon 20 mutation in HER2 have a worse prognosis than wild type.

Okay. Okay. And then maybe just on ROLONTIS, maybe a couple of questions there. I guess number one, you mentioned that although the drug demonstrated non-inferiority compared to Neulasta, there are some differences. And I guess my question is, how effectively will you be able to use those differences in your marketing efforts to achieve formulary placement and contracting with the ROLONTIS?

I'll take that one. Thanks for the question. So the studies are designed to be non-inferior. The package insert will have a non-inferior indication. The public domain, it's available. The differences in our publications, our medical affairs group will obviously have those in response to questions. So it's in the public forum, the results of the study.

But our base expectation is that the label will be a non-inferiority label coming out of the gate. And I do think when the label is available, you'll see, if approved, that non-inferior does not show identical nature. I think when you think about a biosimilar and the 351(k) pathway, there are not head-to-head studies. The products are not novel. So those nuanced differences that clinicians will ultimately evaluate are not there in that pathway. A BLA pathway will have that. And ultimately, that will be represented in the product labeling.

Got it. And then I think a lot of this obviously comes down to contracting and so on. I guess you did mention that ROLONTIS will obviously have its own code, J-Code, and maybe just help us understand a little bit better how that could be an advantage maybe compared to Neulasta or Neulasta biosimilars in terms of access?

I think it comes down to predictability of average selling price. So I think in these high-utilization drug categories, customers are looking for an element of predictability. And when reimbursement is interrelated between multiple products, that causes a bit of uncertainty. And I think having a novel product that our reimbursement is not impacted by anybody else's behavior, in this case, the innovator product, it enables us a unique position to provide a level of stability and predictability of our average selling price.

So when you have a drug category that's among the top 2 or 3 within a pharmacy budget or a community oncology budget, and you have something that enables predictability and stability of average selling price, there's just a number of advantages that it helps. It helps with long-term planning, it helps with you know what to expect. And you have a reliable partner that you see is bringing a value proposition that you can have over time. And I think that's the real key.

Okay. And then one last on market dynamics. I think Amgen said recently that Onpro is holding up. And I think over half of the market is actually Onpro, and the competitive segment would be the, I guess, the traditional long-acting G-CSF. I guess any views on how the market's broken out right now and where you're most competitively positioned?

Our full intention is to compete across the board. You stated it correctly, Onpro does represent about 50-plus percent of the market. And I think we're going to challenge the premise of that stickiness based on clinical value or if that's just based off of game theory and contractual value. So I think that's yet to be determined.

If you look at the uptake of biosimilars, I think it has taken share from both the prefilled syringe as well as Onpro. But I think this COVID dynamic, especially in the second quarter, it provides an added advantage for Onpro just given the limited office visits. But when we -- if we're fortunate enough to be approved in October, we look forward to challenging the premise across the market, whether it be biosimilars or the innovator, regardless of administration vehicle, how we could compete.

Yes, I'll add. If you walk down memory lane and watch when the Onpro first came out, it took a long time before it got market share. And I can tell you that when they got market share is when they added a 2% discount on top. So it was really -- it was driven by the discount. That was the motivation that the office practice managers and the doctors saw in the clinics. And that -- so it didn't take off at the beginning, I'll remind you.

We have your next question from Mayank Mamtani from B. Riley FBP (sic) [B. Riley FBR].

This is Sahil on for Mayank. Congrats on the progress. Just a brief question from my side. I think most of our questions have been addressed. But just wanted to get some color on the cohort 4 enrollment and when you expect to have kind of initial data there or even a preliminary look into the sort of BID dosing strategy? And maybe in the context of the engagement you're having with the FDA and the cohort 2 filing, is this something you'd have prior to that meeting?

Sure. So the -- I think we've indicated that cohort 4 was roughly half enroll, and we have also indicated that we modified the balance of the patient to BID dosing. So that was announced previously. The recruitment, as I indicated before, has been impacted a little bit by different cohorts at different pace here by the pandemic.

And we certainly anticipate that we will be discussing some of the preliminary information we have on that particular cohort, given that it's the same receptor as cohort 2 that we would expect that the FDA would have questions. Obviously, we're looking at data. It's an open-label study, and we will look at it, so that we're in a good position to discuss with the FDA.

Great. And then maybe just a brief follow-up. Could you remind us of the time lines around this FDA engagement for cohort 2 in the sort of 60-day lag time between the PDUFA?

Yes. So we're actively working on preparing documentation. The process is that you request a pre-NDA meeting. And if the FDA grants you that meeting, basically, the clock starts, and usually, they meet with you within 60 days. So by the time you submit the request, you kind of have to know that you're ready to have the discussion and you have to provide them a briefing book. So we're actively working feverishly on putting the briefing book together. So we anticipate requesting the meeting in the very near term.

I'm showing no further questions at this time. I would now like to turn the conference back to Mr. Joe Turgeon, CEO. Sir, please continue.

Thank you, operator. And I'd like to thank you all for your participation on the call today. I really appreciate your interest and your questions in Spectrum Pharmaceuticals. And we'll be participating, by the way, in several virtual health care investor conferences coming up here in September, and we hope to connect with many of you at that time. We certainly will.

Now in the interim, if you have any further questions or need any additional information, please feel free to contact us in between. And with that, listen, thanks for your interest again, and have a great afternoon, everyone. We appreciate it.

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation, and have a wonderful day. You may all disconnect.