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Justin M. Hall is an entrepreneur, investor and author. Hall serves as owner and founder of HiRx, LLC located in Indianapolis, Indiana. He is the author of "The Option Investors Desk Reference©" (2008). Hall invests in areas of innovative growth, such as (1) late-stage drug, device... More
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  • Spectrum Pharma: The Evolution of Zevalin 6 comments
    Nov 7, 2009 01:26 PM | about stocks: SPPI, CTIC, CEPH, BIIB
    I. Rodman & Renshaw Annual Global Investment Conference on September 10, 2009

    II. UBS Global Life Sciences Conference on September 23, 2009

    During presentations I and II, presentations were roughly the same.

    NOTABLE
    1. Please with extremely broad label per FDA recommendation
    2. Very attractive commercial opportunity with Zevalin
    3. Expanded Patient pool on day one, 43,000 NHL patients would qualify.
    4. Watch and wait patients are treated in year 3-5.
    _____________________________________________________

    III. 2009 BIOCOM Investor Conference on     October 27, 2009

    During presentation III, the message changed dramatically.

    NOTABLE
    • Fusilev: Meet with FDA to discuss a strategy for approval. Regarding the FDA's recent decision, “I have no idea what that means.”
    • Eoquin was acquired $100,000.  SPPI partnered the drug with AGN for $300 million.
    • SPPI has 8 drugs in development and “no drugs in test tube.”  SPPI is not in the business of drug discovery.
    • Financial strength: $150 million in cash
    • Successful management team that is focused on Zevalin.
    • D&T ranks SPPI as the 22nd fastest growing technology company in the world.
    What is Zevalin?
    • On September 4, 2009, Zevalin was finally approved for first-line use in all grades of non-Hodgkin’s lymphoma (NHL).
    What does first-line approval mean?
    • Prior to September 4, 2009, Zevalin was only indicated for a very small segment of the entire NHL market.
    • Rituxan and Treanda have sales of $2 billion and $300 million, respectively.
    • In 2008, Zevalin sales were a meager $11.3 million. “How much? $11.3 million.”
    • “We bought the rights to this drug because we saw the potential with the drug.”
    • “Our intentions are to turn Zevalin into a hundreds of millions of dollars in sales franchise. And you’ll see why.”
    • [8:50] “So the current approval is now the approval that we got six weeks ago is for first-line indication. That means, the usage of this drug [Zevalin] went from less than a 1,000 patients for a year will go to 43,000 patients for a year. Easy math. Forty-three fold increase in the usage in this drug.”
    • “Eleven million? And we think sales from this drug could be in $100, $200, and $300 million range easily.”
    • Zevalin is a single dose treatment with PFS of 5 years.
    • Peak sales of Zevalin were $20-$23 million per year.  The reason: the company previously responsible for marketing Zevalin, Biogen Idec (BIIB) also sold Rituxan.
    What is our marketing strategy?
    • On 9/4/09, everything changed with first-line approval. NCCN guidelines list Zevalin as “Category 1” for NHL. Rituxan is “Category 2b” for maintenance.
    • Until 9/4/09, reimbursement was an issue.  Fifty states reimbursed Zevalin in fifty different ways.  Many doctors, who used Zevalin, lost money. So, there was NO incentive for doctors to use the drug. The reimbursement policies of Medicare and private insurers were very different.  
    "Things are changing."
    • CMS has recommended that this drug should be reimbursed like all other oncology drugs, average sales price (ASP) plus 4% to 6%. The CMS made this recommendation.
    • Update: On November 3, 2009, SPPI announced that the CMS approved Zevalin for reimbursement at ASP plus 4% to 6%. Beginning January 1, 2010, Zevalin will be fully reimbursed.
       
    • In the past, no more than 20 sales executives marketed Zevalin. In 2008, Cell Therapeutics (CTIC) only had seven people selling Zevalin. As of 9/4/09, the company more than doubled its sales force from 24 to 50. Today, up to 70 SPPI reps will sell Zevalin.  “We believe Zevalin deserves attention. It’s a better drug.” Zevalin provides longer disease progression free survival. “It needs to reach patients.”
    • If a doctor wants to use Zevalin, then call Spectrum Pharmaceuticals at 1-800-Zevalin. There, the company can and will help you with all of the logistics so that you can administer the drug to your patients.
       
    • Zevalin is one dose unlike Rituxan you have to give every 6-8 weeks or like Treanda.
    • Rituxan is marketed by partners Biogen Idec (BIIB) and Roche (RHHBY.PK).  Treanda is marketed by Cephalon (CEPH).

    KEY MILESTONES [24:07]

    ZEVALIN
    • Stabilization and sales growth of Zevalin
    • Earnings are scheduled for Friday, November 13, 2009 at 1:00 PM ET.
    • Quarter over quarter (Q1 to Q3): “Zevalin sales have been increasing exactly as we anticipated and as expected.” 
    • “So, we are very pleased with the sales growth of Zevalin. Our first requirement was that we should be able to stabilize sales of Zevalin, which I think we have achieved." 
    FUSILEV
    • Continue the sales of Fusilev. 
    • Meet with FDA to see what they have in mind about approving colorectal cancer indication
    EOQUIN
    • Complete enrollment.. 
    • Start another study. 
    • Out-license rights in Japan and the rest of Asia. 
    FINANCIAL HIGHLIGHTS
    • 48.7 million shares outstanding
    • $150 million in cash
    • $3.20 cash per share
    • $0 debt
    • Diversified sources of revenue
    ONE THING TO LEAVE YOU WITH . . .
    • SPPI is a very diversified company. The company’s success does not hinge on any one binary event.

    Disclosure: Long SPPI.
    Themes: The Evolution of Zevalin Stocks: SPPI, CTIC, CEPH, BIIB
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This post has 6 comments:

  •  
    Good up to date summary. Thanks for your time Justin.
    Nov 07 06:13 PM | Link | Reply
  •  
    Justin,
    What is your source to indicate that the reimbusment is ASP + 4% or 6%. I wish it is true, but right now it seems Zevalin may not even get reimbused at the 20K + that it should get to make it profitable for the hospitals. There is some document on regulation.gov that says the manufacturer needs to submit data on pricing to determine the reimbusement level. So, ASP reimbusement is a positive, but the real deal will be the price at which Zevalin gets reimbursed.
    Nov 07 06:18 PM | Link | Reply
  •  
    Thanks DT!
    Nov 07 06:43 PM | Link | Reply
  •  
    Quest:

    My source is SPPI's CEO Raj. The above are detailed notes from the BIOCOM presentation on October 27, 2009 as was indicated above.

    Regarding the reimbursement as I understand it, Zevalin will now be fully reimbursed as of January 1, 2010 at ASP (compared to other inj. chemotherapeutics) +4 to +6%.

    The reimbursement may not necessarily lead to a higher price per se, however, doctors may find Zevalin easier to use if reimbursement is a simple process (encourage use).

    So, I suppose that the company could be required to sell Zevalin at a lower price in order to make it easier to obtain consistent reimbursement.

    In addition to the other steps the company is taking, simplification of the process should provide a little incentive for doctors to use the drug.

    The reimbursement issue is a bit confusing and 100% mind-numbing. So, I could be way off here.

    Justin
    Nov 07 07:02 PM | Link | Reply
  •  
    Well,

    Zevalin has got ASP+4% reimbursment. Manufacturers should submit sales data every quarter or half year. If they can not send detailed data then mean cost data will be applied.
    The last real remained issue is that dosimetric and diagnostic dose, the "cold" dose is still not recognized in zev package as a therapeutic component, so it is still not reimbursed in correct manner.
    This issue is going to be solved eliminating bioscan need before therapeutic "hot" dose...hoping this is to come in 2010.
    I read all rule about RIT changes and that's all.
    Abolishing bioscan is the last real issue to solve to launch zevalin toward sales numbers Raj was presenting (2-300 mil$).

    Sorry for my poor english (i'm italian).

    Bye
    Nov 08 05:28 AM | Link | Reply
  •  
    Hope this helps..

    www.aimn.it/documenti/...
    Nov 08 05:36 AM | Link | Reply
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