Spectrum Pharmaceuticals, Inc. (NASDAQ:SPPI)
Q2 2016 Earnings Conference Call
August 09, 2016 04:30 PM ET
Shiv Kapoor - VP, Strategic Planning and IR
Rajesh Shrotriya - Chairman and CEO
Kurt Gustafson - EVP, CFO and Principal Accounting Officer
Joseph Turgeon - President and COO
Thomas Riga - SVP and CCO
Adnan Butt - RBC Capital Markets
Good day, ladies and gentlemen, and welcome to the Spectrum Pharmaceuticals, second quarter earnings conference call. At this time all participants 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] As a reminder this conference is being recorded.
I would like to introduce your host for today’s conference, Shiv Kapoor, Vice President of Strategic Planning and Investor Relations. You may begin.
Thanks. Good afternoon, and thank you for joining us today for Spectrum’s second quarter 2016 financial results conference call. I hope you've all had a chance to review the press release we issued earlier today. If not it’s available at our website at www.sppirx.com.
I’d 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 and drug candidates that involve risks and uncertainties that could cause actual results to differ materially.
These results 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 day of this conference call, August 9, 2016, 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. Dr. Raj Shrotriya, our Chairman and CEO will start the call today and provide you with the highlights of the second quarter and our overall direction and strategy. Kurt Gustafson, our Chief Financial Officer will then provide a summary of our second quarter financial performance. Following this, Joe Turgeon, our President and Chief Operating Officer; will review the company’s commercial and research operations. We will then open the call up for questions.
I would now like to hand the call to Dr. Shrotriya.
Thank you, Shiv, and thank you everyone for joining us this afternoon. I am pleased to report that we had a strong quarter and we made solid progress on our pipeline drugs. We have been executing on a growth strategy that is focused on developing a variety of novel, patented, proprietary drugs that could help large number of patients and address multi-billion dollar markets.
Let me share with you what makes me most excited. Our top priority is SPI-2012, which is a novel long acting Granulocyte- Colony Stimulating Factor or G-CSF which entered registrational Phase 3 trial earlier this year after we received a special protocol assessment or SPA with the FDA. I'm pleased to report that our enrollment is on track with 84 clinical sites that are now open in the U.S. for patient enrollment. We continue to see strong clinical interest in SPI-2012. Our goal is to file BLA, or the registrational application in 2018. If approved by the FDA we will be well positioned to compete in this multi-billion dollar market.
Our second high priority drug, poziotinib is in Phase 2 trials and enrolling breast cancer patients who have failed other HER-2 directed therapies. This is a multi-targeted oncology drug that has shown the potential to be best-in-class.
Our third drug, Qapzola is being studied in non-muscle invasive bladder cancer. A new drug application is under active review by the FDA. We look forward to making a presentation to the FDA's Advisory Committee next month. The FDA has established a decision date of December 11.
I'm pleased with our sales this quarter. We operate in a dynamic and competitive environment and are demonstrating our commercial strength. This gives me high confidence in our ability to execute.
We have recently launched a sixth drug, EVOMELA for multiple myeloma. This is the first drug to get FDA approval for the high dose conditioning indication in multiple myeloma. EVOMELA is devoid of propylene glycol, is solvent that is present in both competing drugs and is considered toxic. In addition, our drug has the advantage of being more stable than the competition.
Our drug is also sold as a single vial and has an additional indication on the label. Customers are recognizing the operational benefits of EVOMELA to more efficiently administer treatment to their patients. We are pleased that we can offer this new option to patients and physicians.
In a nutshell, with multiple advanced [indiscernible] oncology programs development, the launch of EVOMELA in the U.S. and a strong balance sheet I'm enthusiastic about the future of Spectrum. We are focused on developing three drugs that target large indications such as chemotherapy induced neutropenia, a multi-billion dollar market, breast cancer and bladder cancer, both large markets. The success of any of these would benefit both patients and shareholders and transform our company. We remain a highly diversified company not dependent on any one technology or any one drug.
In a few minutes Joe Turgeon, our President and Chief Operating Officer will provide you more details about our operations later in the call. But before that let me hand over the call to our Executive Vice President and Chief Financial Officer, Mr. Kurt Gustafson to talk about our financials. Kurt?
Thank you, Rajesh and good afternoon everyone on the call today. Let me just highlight a few areas. First total revenues for the quarter were $33.9 million. Of this product sales were $30.9 million and licensing revenue was $3.1 million. The sales of our PTCL franchise this quarter were $14.7 million driven by continued strong demand for this franchise. FUSILEV sales were $10.5 million. We continue to expect FUSILEV sales to drop significantly based on the generic competition in the marketplace.
As we look ahead to the third quarter we are seeing a much deeper drop in ASP or average selling price than we've seen in previous quarters, which will results in much lower realized price to us.
We reported EVOMELA sales of just under $1 million. Given that this is a new launch we are recognizing sales based on pull-through sales to end users. Our focus has been on gaining formulary access for EVOMELA in leading U.S. institutions. We're pleased with the progress we are making here and we expect sales to grow in the second half of this year.
Moving on to expenses, our GAAP SG&A expenses were $27.6 million but included some one time legal costs. Non-GAAP SG&A expenses were $16.1 million, which exclude these one-time expenses, were lower than last year's non-GAAP expenses of $19.7 million. R&D expenses ramped up slightly in the second quarter relative to the first quarter excluding one-time milestones. This is consistent with our expectations that these costs would increase based on the enrollment of our clinical stage asset.
The company raised $45.1 million in the second quarter and an additional $28.8 million in the third quarter for a total of $74 million using an aftermarket securities offering.
With that let me now hand the call over to Joe.
Thank you, Shiv thank you Kurt and thank you Dr. Raj and thanks to everybody on the call. Much progress has been made by our team in recent months. Let me give you an update on the key programs that we have ongoing here at Spectrum.
SPI-2012, our novel long-acting G-CSF is our highest priority. The drug has shown an excellent clinical profile, and it targets a blockbuster market. Our Phase II data demonstrated that SPI-2012 was not inferior to pegfilgrastim at the mid-dose tested and statistically superior in terms of duration of severe neutropenia at the highest dose test.
We started enrolling our Phase 3 study in the first quarter. This is a randomized controlled trial, which will evaluate SPI-2012 in the management of chemotherapy-induced neutropenia in 580 breast cancer patients. We now have 84 centers actively recruiting patients into the trial. I'm excited by the interest in our drug from leading clinicians, and I'm pleased to report that our early enrollment is on track, and this trajectory gives me confidence of achieving our goal to file the SPI-2012 BLA by 2018.
I'm especially enthusiastic about this opportunity, because our team has broad experience in the white blood cell factor growth market and oncology wherewithal to make this novel biologic a success. I believe this drug has the potential to change the face of our company.
Regarding EVOMELA, we're very pleased with the progress of the launch. Customers are recognizing the advantages of EVOMELA's added stability, the absence of propylene glycol, the convenience of a one vial system and the additional indication on the label. As a reminder, over 90% of this market is concentrated in just over 100 accounts across the U.S. Furthermore, over half of the business is concentrated in the top 20 transplant centers. These large institutions can take six months or longer to evaluate, accept and operationalize any new product. We're encouraged by the fact that several top-tier transplant centers have committed to adopting EVOMELA. As a result, we expect an inflection in sales going forward.
Moving onto poziotinib, our novel pan-HER inhibitor; Poziotinib is being studied currently in the U.S. Phase 2 study involving breast cancer patients, who have received prior HER2 regimens. We believe poziotinib has the potential to be a best-in-class pan-HER inhibitor. Poziotinib has shown a 60% response rate in Phase 1 patients with breast cancer who have previously failed multiple lines of treatment, including HER2-directed therapies. Our Korean partner, Hanmi is studying this drug in Korea in many mid-stage studies in several tumor types, including breast cancer, non-small cell lung cancer and gastric cancer.
We are focusing our efforts in breast cancer, because of the exciting data we have seen from this compound. Our strategy is to first seek FDA approval for this drug in breast cancer patients, who have failed prior therapies and who therefore have few options left, and then continue to develop it for larger indications in combination with other therapies.
Lastly, let me talk about QAPZOLA, also known as apaziquone, our potent tumor-activated drug for bladder cancer. This Phase 3 data from QAPZOLA was presented at an oral presentation at the 2016 annual AUA meeting in May. There are a couple of important milestones for this drug later this year.
First, we have an FDA Advisory Panel on September 14, and we are currently preparing for that Advisory Panel meeting. We have engaged with experts in the field of urology to assist us in this important endeavor. The FDA is expected to make a decision on the approval of this drug by the PDUFA date of December 11, 2016.
These are exciting times for Spectrum, and we're well prepared for both the challenges and the opportunities of the future. We are focusing on executing our strategy of delivering multiple advanced stage drugs to target large indications such as breast cancer and bladder cancer. If any of these drugs are successful, it could transform Spectrum as we know it today. We remain focused on the goals ahead and look forward to updating you on our progress.
With that, I'd like to turn the call back over to Dr. Raj.
Thank you, Joe. While progress has been made in cancer prevention, detection and treatment over the past two decades, according to the American Cancer Society, cancer-related deaths are expected to increase from 8 million to 13 million worldwide. We have three advanced stage assets that target large cancer markets that can have a profound impact on cancer patients. We're inspired by the opportunity to address the growing needs of patients suffering with cancer. We are encouraged by the positive clinical results to-date from our advanced stage drugs and are motivated to pave it [ph] back, that could transform the company within the next five years.
With that let's open the call for questions. Operator?
Thank you. [Operator Instructions] And our first question comes from the line of Adnan Butt from RBC Capital Markets. Your line is open.
Thank you. A couple of pipeline questions, and then maybe a question for Kurt as well. So first on apaziquone, could you tell us the FDA's review timeline or FDA's approval decision, is that contingent upon achieving a certain enrollment in the ongoing Phase 3 study?
So Adnan, thank you for your question. To best of my knowledge and understanding the FDA's decision will be based on the application that we have filed, NDA, rather than on the ongoing study.
Okay, so that's fine, that's good enough. Maybe I can ask one on poziotinib as well. Could you tell us on average how many lines of therapy these patients would have failed and is it only the approved therapies or also those in development that they could fail?
So that's a good question. Patients should have failed two therapies, pan-HER direct -- the HER directed two therapies. I'm not sure about -- in fact the experimental treatments may not be allowed because FDA and the researchers don't look favorably that the patients go from one clinical trial to the second clinical trial. However I don't think that it's especially mentioned in the protocol that patients should not have participated in other trial. What they say is patients should have not participated in any trial with poziotinib and [indiscernible]. So to answer your question patient should have failed two treatments.
Okay and then if your partner Hanmi presents any data in Korean studies would you have access to that data and share it or is that entirely upto Hanmi?
No, in fact we have an agreement that we will share all the data with them and they will share all the data with us in fluid manner. So I expect full cooperation from them and as soon as their data is ready, which could be by the end of this year or early next year we will have access to that data.
Okay, and then last question, it's a finance question. I see the company has raised money. Is there a specific purpose for that raise? Is that to -- considering the convert outstanding, is it for a deal, any color on that would be helpful?
So I would like to say that we have aggressive programs underway. We are developing three drugs at the same time; one in Phase 3 and one Phase 2. We want to expand all these trials. So we want to make sure that we are well capitalize to run these trials in a very efficient manner.
Okay. That's it from me. Thank you.
Thank you. And our next question comes from the line of Ed White from SBR and Company [ph]. Your line is open.
Thanks for taking my call. So just a few questions. First on 2012, you had said that 84 sites are open. Are those all in the U.S. or is that the U.S and Canada and how many more sites are pending to open?
So Ed, at this time all the 84 sites are in the United States. We have just received approval from the Canadian HPV [ph] to start opening sites in Canada. And we expect over the next six months there will be some -- more sites will be added from Canada.
Okay. And then on EVOMELA, Joe had mentioned the size of the market there, that half the businesses in the top 20 transplant centers and several have been adopted, but can you just give me give us or tell us how the discussions there are going, to getup on the formulary. Is this going to be a long process, is it going to take six months, a year or should we start expecting to see additions to the formulary starting January 1?
Ed, let me have our Chief Commercial Officer, Tom to take this question.
Hey, Ed, how are you? When we're looking at EVOMELA we are thrilled about the receptivity that customers have to the product. They're seeing the clinical and operational benefits of the stability and the lack of propylene glycol. And one of the precursors to adoption is going through the P&T process, the contractual process and loading pricing, all of which we're seeing in process. So we're really optimistic of where the sales will be going moving forward and the receptivity that the customers are having through the process.
As Joe mentioned in his comments typically it takes in the neighborhood of six months to operationalize the process within large institutions and we're on the backend of that as we speak.
Okay. So I'm just wondering if there is going to be a bolus of sales coming maybe not next question but the quarter after that or is it going to be more smooth gradual increase in sales?
We don't provide quarterly guidance as you know. But I'm thinking -- I think what you'll see moving forward is sales will increase and we'll keep you updated as future calls unfold.
So Ed, just to give you a color from a physician's point of view, you have a drug that for the first time has an indication for an high dose intensity for multiple myeloma, that patients use in bone marrow transplant centers. For the first time you have a drug and it's not only highly active but for the first time it does not have propylene glycol which was a big concern. And of course the third concern was that the shelf life of the existing drugs, the shelf like is 30 minutes to 60 minutes. We have a shelf life of four hours.
So I think these are advantages that I personally think as a physician who knows these benefits, why would they use another drug, I have no idea, why would they use it especially there is no price pressure [ph]. So I'm persuaded by the argument that we have a superior product and it should -- as soon as the contractual issues and all these problems are solved, they should be an adoption in the clinics.
Right. No, I agree with you Dr. Raj. And just my last question, I'm just wondering if you're seeing any interest from partners in SPI-2012 outside the U.S. or apaziquone either in the U.S. or outside of the U.S. Thanks for taking my questions.
Ed, it is premature. All I can say is that we are not in the final stage of signing any agreement at this time. But it is premature, there are always indications. We have a number of companies we are talking to and they're talking to us. But we are not signing any agreement at this time.
Okay, thank you very much.
At this time I'm showing no further questions in the queue. I would like to turn the call over to Rajesh Shrotriya. You may begin.
Well I want to thank all of our listeners today for your interest in Spectrum. We look forward to updating you in the near future on the progress that continues. Thank you.
Ladies and gentlemen, thank you for your participation in today's conference. This concludes the program and you may now disconnect. Everyone have a great day.
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