Q4 2021 Spectrum Pharmaceuticals Inc Earnings Call
Thank you for standing by and welcome to the spectrum Pharmaceuticals fourth quarter 2021 earnings call. At this time all participants are in listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question. During this session you will need to press star one on your telephone as a reminder, today's program may be recorded I would now.
Like to introduce your host for today's program, Kurt Gustafson Executive Vice President and Chief Financial Officer. Please go ahead.
Thank you operator, and good afternoon to everyone.
Thank you for joining us today for spectrum Pharmaceuticals fourth quarter and full year 2021 financial results Conference call.
Our fourth quarter and full year financial results press release was sent out earlier. This afternoon and is available on our website at www Dot <unk> dot.
Dot com.
Joining me on the call today from spectrum Pharmaceuticals, Tom Riga, President and CEO and Dr. Francois Labelle, Chief Medical Officer.
Before we get started I would like to reference to 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.
Yes.
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 financial results and 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 Tom Riga CEO of spectrum.
Good afternoon, and thank you for joining us on today's call.
It is a pleasure to address this audience for the first time.
As the president and CEO of spectrum.
The responsibility of representing our employees investors and corporate partners is both a privilege and a responsibility I take great pride.
I accepted this position with a full understanding of the past realities and the future opportunities of the company.
I believe the company is at a pivotal moment in its history and I expect to provide a disciplined pragmatic and objective leadership approach to capitalize on the opportunities in front of us.
It's been helpful to engage listen and communicate with many of our investors analysts and stakeholders I've appreciated the open and candid and productive discussions, thus far and Nintendo and intended for those engagements to continue as we chart our path forward.
The first two months of the role has been fast paced productive and focused on advancing our late stage programs.
Me provide the highlights in January we made a strategic decision to restructure and streamline our operations to focus on our late stage product opportunities with the ultimate goal of gaining two FDA approvals this year.
The restructuring was an opportunity to take a hard look at the organization and to right size the company to meet the core business objectives, while also optimizing our cash runway.
We reduced our staff by approximately 30% and expect to see a reduction in our operating cash burn by 20% to 25%.
We're making decisions that impact staff it is never easy, but in this case necessary.
We also strengthened our partnership with Hanmi Pharmaceuticals, which included a $20 million equity investment and.
An amendment to the licensing and supply agreement for both <unk>.
And as luck.
Congrats.
The amendments will allow us to maximize our near term cash flows and provide improvements to our cost of goods.
Furthermore, we recently announced the addition of Juno Lynn to the board of directors.
<unk> currently serves as the president of global strategy and planning at Hanmi Pharmaceuticals.
We look forward to her leadership and input on our board as we seek to achieve our shared goal of bringing both products to market in the U S.
Ah sounds partnership with Hanmi is critically important to spectrum as our late stage assets stemmed from their in their development pipeline in SBA approvals will allow them to advance their position in the U S.
At this point the partnership dynamics between our companies has never been stronger.
As it relates to our late stage assets, let me start with pose yacht.
On February 11th we announced the FDA accepted our NDA and assigned a <unk> date of November 24, with the initial indication for the treatment of patients with previously treated locally advanced or metastatic non small cell lung cancer harboring her two exon 20 mutations.
This product is a fast track designation and there are currently no approved treatments for this indication.
We believe that <unk> could have first mover advantage in this area of high unmet medical need are.
Our team is actively working with the agency as they conduct their review a policy on it.
Any FDA approval for this indication is a top priority.
Since filing we announced additional positive data at the ESMO Tat meeting for the first line treatment naive lung cancer patients harboring her two exon 20 insertion mutations Francois will cover this in more detail in his remarks.
As we think about the broader strategy for Posey at Nab, We will focus our resources in areas of significant unmet medical need and high patient prevalence. This strategy is shaped by the clinical data that we observed from our own studies, the competitive landscape relative risk and cost of the inverse.
And it required.
For example.
And her too there was interesting preclinical data presented at the ACR Triple meeting showing synergy between Posey outlet in K Ras <unk> inhibitors. This combination would fit our strategic intent as the unmet medical need is real and the targets target patient.
<unk> is significant.
Equally as important to our strategy is defining where we will not spend our resources going forward.
To date, our studies in Egfr exon 20 insertion mutations have not met their primary endpoints, despite demonstrating strong clinical activity.
In addition, there are now two drugs approved in this space.
As a result, we will no longer be pursuing posing out there as a standalone therapy for Egfr patients.
In summary, we have an NDA under review with an action date in November. Additionally, we see a clear development strategy for this asset that will be guided by clinical data and analytics to optimize our resources and help patients in need.
Now, let me shift to outflow progressive.
Today, we announced that the BLA has been resubmitted to the FDA for review.
This is a significant step forward in bringing this novel therapy to patients.
We would expect this to be a class II review with a 30 day acceptance and a six month review cycle.
Our resubmission followed the remediation of manufacturing deficiencies in our drug substance facility.
And our type a meeting with the FDA. They have indicated that an in person reinspection of the facility in South Korea will be required.
We look forward to working with the FDA through their review process.
Moving forward, we will be referring to the product as Epsilon, Nebraska and no longer calling it roll office.
We were informed by the FDA that our conditionally approved name would no longer be valid as there is now a potential conflict with another product which is currently under review.
We have proposed a new name for the agency with the Resubmission, but until that new name is approved we will revert to the scientific name.
As you can see we are working diligently on our two key programs with a strong sense of urgency and excitement we.
We are focused on gaining two FDA approvals later this year.
Over the past few months, we have made substantial progress on these programs streamlined our operations elevated our corporate partnerships and are executing on our core business objectives.
Finally, I'd like to take a moment to thank Kurt for his years of service to spectrum and the valuable insight. He has provided it is just time as CFO .
He played an important role in the company and we all wish him well in his future endeavors, we have an active search underway to replace the CFO role and we will keep you posted as we make progress.
With that I will now turn the call over to Doctor Labelle for a more detailed update on our clinical development programs.
Good afternoon, everyone I'm glad to be with you on today's call, let's start with our top achievement the acceptance of our proposed the NDA.
For our initial indication is a major step towards advancing the treatment for patients with her two exon.
20 mutation in non small cell lung cancer.
The filing is based on our positive data from cohort two of the <unk>.
Clinical trial, which consisted of patients with locally advanced or metastatic non small cell lung cancer armoring. Her two exon 20 insertion mutation who had failed previous street, we believe pose the as the potential to be the first to market.
For this specific indication an area of great unmet medical need.
We were encouraged by the positive result presented at the recent ESMO Congress by doctors to start from the British Columbia Cancer Agency and a normal presentation.
Now have two positive cohorts from our pose the program. This data from the Zenith. One study that included a total of 70 patients.
Received 16 milligram per day of oral pose the opposite.
The first 48 patients in the cohort received 16 milligram once daily with an additional 22 patient dose at eight milligram twice daily and.
The primary end point was.
I know our are evaluated centrally by an independent image Review Committee Posey met the primary endpoint in this 70 frontline patients with no or or a 41% and the valuable patient war or a 50% the lower back.
M a 30% exceeded our required prespecified criteria of 20%.
The mean duration of response was five seven months with one patient on drug for 19 months.
The eight milligram dosing.
Dosing allows better tolerance and nearly 20% lower dose reductions.
Treatment related grade three or iron adverse events were as expected with rash stomatitis and <unk>.
Irina and paronychia being the most common importantly incidents of grade three or I or pneumonitis continues to be low at 3% or two patients only and no drug related deaths.
Your are for 16 milligram, QD and eight milligram dosing.
Dosing schedule was 44% and 36%, respectively and were not sophisticated <unk> different.
Duration of response and PFS were similar between the two groups.
We are pleased with these positive results as this is the second successful heard two cohort of <unk> 'twenty.
Our main priority is to gain approval as soon as possible to address the unmet medical need.
Question on whether we could seek a first line indication based on positive cohort four data with the same.
Of November 24.
The short answer is no.
The bar for approval in the treatment naive population is often higher than in the relapsed setting the range of possibility could include.
A full phase III program, or perhaps something less given the unmet medical need we plan to meet with DSD to align on the regulatory strategy for the first line setting.
Now, let me shift to some other imposed yachts and the data that was presented at the ACR Triple meeting late last year Doctor John aimed at groups at the MD Anderson presented interesting preclinical data demonstrating the synergistic activity.
Of cozy when combined with K Ras inhibitors in K Ras G. One in Houston specific cell lines. The preclinical data show that inhibition of Egfr heard two or three and our four signaling was necessary to demonstrate center.
When combining cozy any K Ras G 12 season ended.
These result, I liked the importance of a potent and pan inhibitor of the <unk> family of proteins. This combination of Posey and Keith was C inhibitor warrants further investigation.
We continue to make solid progress on our clinical development programs and regulatory strategy for both of our late stage products. We will keep you posted as we achieved additional key milestones through the balance of the.
I will now turn it over to Kurt for a discussion of our fourth quarter financials.
Thank you Francois.
Let me begin with the fourth quarter figures.
Total research and development expenses were $18 million in the quarter as compared to $47 2 million in the same period of 2020.
The favorability is primarily related to the charge we took in the fourth quarter last year to discontinue the development of our second manufacturing site for Apple Nebraska.
SG&A expense was $18 9 million in the quarter compared to $15 7 million in the same period of 2020.
SG&A expenses were higher in this quarter as we recorded a $4 $9 million severance expense for our former CEO.
Approximately half of that expense is noncash and was associated with the acceleration of equity compensation.
The net loss for the quarter was $39 8 million or <unk> 26 per share compared to a net loss of $49 9 million or 36 per share in the comparable period of 2020.
On a non-GAAP basis, the net loss was $26 4 million or <unk> 17 per share compared to a non-GAAP net loss of $28 9 million or <unk> 20 per share.
Terrible period of 2020.
I won't cover the 12 month numbers in detail, but on a non-GAAP basis. The figures for SG&A R&D and operating income were very similar year over years with slight reductions to SG&A and slight increases in R&D in 2021 relative to 2020, you'll.
You'll find all of these figures in the press release that was just distributed.
We ended the fourth quarter with approximately 101 billion cash plus marketable securities compared to 134 million at September 32021.
As Tom mentioned, we received a strategic equity investment from Hanmi in January of $20 million, So a pro forma cash balance, including the equity investment from Hanmi is $121 million.
Cash burn in the fourth quarter was $33 million in operating cash burn was approximately 30 million.
Primary difference is related to the unrealized losses on equity securities.
The pro forma cash combined with the restructuring announced in January that will reduce operating cash burn by 20% to 25% is expected to extend the company's cash runway into 2023.
That concludes our prepared remarks, and I'd like to open the call for questions.
Operator.
Certainly listen gentlemen, once again, if you have a question. Please press Star then one our first question comes from the line of Maury Raycroft from Jefferies. Your question. Please.
Hi, This is Kevin strain on for Maury, just wanted to say congrats Kurt and good luck in the future.
And also thank you for taking my questions.
First.
Thanks, and just wanted to first ask about.
The status of your confirmatory trial.
What do you think the FDA means by substantially enrolled and what is your confidence that you'll be able to reach that goal by your <unk> date.
Yeah, I'll, let francois take that one Kevin.
Sure. So we plan to give you an update on the PMA or at a later date.
Our practice has been that we make announcement about design and details of the trial once we enroll the first patient.
So what I can tell you today is that actually we have initiated the confirmatory study.
We secured our first central IRB approval, and we are operating with a great sense of urgency to the point, you're making we're very aware that we need to show.
Significant enrollment the SBA does not define what they.
<unk> mean, and I think we think of that.
Being able to demonstrate good momentum is critical and that's why we are proceeding in the whole demons proceeding with greater urgency.
As we speak.
Great. Thanks, and then just for my follow up question.
For cohort five so you said, you're not going to pursue egfr.
Is it possible that you leave this study open for her to patients to support a possible dosing update the label or for additional info for the FDA or or do you plan on shutting down that cohort.
Yes, good question Kevin.
We plan on keeping new her two component of that open and allowing us to continue to enroll for for a number of reasons dosing is one of them also to capture additional data, but the egfr components of that will will be closed down.
Okay, great. Thanks, I'll hop back in the queue.
Thanks.
Thank you. Our next question comes from the line of Ed White from H C. Wainwright Your question. Please.
Uh huh.
Hi, Tom Thanks for taking my questions and cart.
Been a real pleasure working with you. This past 10 years I really appreciate all of your help over the years.
Thanks, Ed I appreciate that.
So maybe just.
Our first question on something Francois just said.
About.
The first line please.
Patients.
In the past you had said that cohort four was the potential pivotal study.
And now I believe he said that you could need a phase three.
But you have to talk to the FDA first.
Just curious as to what might have changed over the years to give you a thought that you might have to run a another phase III.
Phase III study.
Yeah. Thanks for the question I think that's ultimately.
Something that that is made who call on because we just got the data we need to speak to the agency and there's been a lot of questions about can we simply include that data with our current file or how should we think about it and I think the reality here is until we have a formal.
Type a meeting with the agency to share this particular data against <unk>.
How they're thinking about the frontline indication.
I don't want to leave with an expectation that this is going to either be included with the existing indication that submitted or even that of an S. N yet certainly could be.
Accelerated approval.
There is a big unmet medical need, but there is a range of possibilities and until we have that formal engagement, which we will have we.
We wanted to make sure that we were clear on how we were seeing.
And I would add to that.
You know what I said is actually quite consistent to what we've said before as you know the first four cohorts were what we called registration level in terms of value were executed they add prespecified NYSE at a central IRB.
None IRB, but the data safety monitoring board and review process.
So we've met the primary endpoint, but obviously that positions us quite well, but we've also said in the past that.
They would have to be a judgment about durability of response, the safety profile and whatever other product would be on the market at the time that this would happen. So all these factors are going to be called into question here or you know are we will add to discuss with the agency. So there is no.
As said back year, it's purely that we have to go and present all the data to the agency and see where their golf you probably know as well that in first line.
As always the bar is a little higher than in second so those are some of the other elements that are part of our.
Decision and what's coming Bull.
Okay. Thanks, Francois and how should we be thinking about a potential label in second line.
Is there the possibility of getting the eight milligram b I D dosing or.
Or are you thinking even has to be 16 milligram to start.
Yes, that's a great question. So you know that the colored twos dose at 60 milligrams QD in cohort five and a number of the work that we've done have produced.
Pretty healthy body of evidence in the B I D setting, so we'll wait and see until the label negotiation part of the discussion with the agency occurs but we are seeing the 62 D is certainly a safe and effective dose and I think over time, we have learned to optimize some of the.
Ability and abate some of the easier will be IV dosing. So I think that will be a key topic when we get to a.
Label negotiations with the agency and we're simply not at that point of view cycle, which will be coming here shortly.
Thanks, Tom and perhaps a last question for Kurt.
With the restructuring and then also with the potential launch of two products by year end.
How should we be thinking about.
The progression of SG&A and R&D expenses over the course of a year where are you as far as as.
The commercial team is in the house, we should be thinking about additions or.
Over the course of the year.
Yeah, no. Thanks Ed.
The specific guidance that.
We gave related to cash burn so operating cash burn.
It fluctuates a little bit but over the course of 2021 was roughly around $30 million a quarter.
Said post the restructuring, we expect that number to be down 20% to 25%.
I'm not going to get into specifics around how to break things down between SG&A and R&D just.
Cash is probably the most relevant number to be thinking about here.
For us.
The caveat to this is obviously the restructuring happened in the first quarter. So.
In Q1 is always traditionally our higher burn quarter. So Q1 is going to have some some extra costs associated with the restructuring and so the realization of that really is something that starts in Q2 and then it goes on from there.
As it relates to commercial team Tom do you want to yeah.
And I think the guidance that we've given with the cash runway is assuming that those those launches are funded and as I think about the commercial team. We intend to do this with a competitive and lean group even despite the restructuring we believe we've kept some world class commercial.
<unk> talent and the oncology ecosystem, even in a post COVID-19 environment. One continues to consolidate and to access continues to be a challenge and I don't see that changing so I think having these need infrastructure.
Is the right approach and I think we are we have the right team in place to get these products off the ground successfully.
Okay great.
For taking my questions.
Thanks, I think that.
Thank you. Our next question comes from the line of Reni Benjamin from JMP Securities. Your question. Please.
Hey, Good afternoon, guys, let me add Tom My congratulations and.
Curt sorry to see you go but best of luck on the new position great interacting with you of course.
Thanks.
You bet.
But just maybe.
Yeah.
Question on Posey in terms of the review right. Tom You mentioned you had fast track.
Single arm study and I was a little bit.
I couldn't figure out why the FDA would grant you guys standard review instead of a priority review unless I've made my calculations can.
Can you just talk to us a little bit about.
The review process and.
Why it appears to be a standard review.
Yes, that's a great question Ron So you are right we do have.
Accelerated approval with a phase two single arm study and it does have a fast track.
Well, you're referring to is we were not given a priority review we were given a standard.
So I try not to get into the mind of the FDA and their thinking on that I do know that we're thrilled to have a <unk> date in November and the pace of the interactions with the agency and how we're progressing through the regulatory process.
We are pleased with his farm and we're going to make sure that we're ready to rock and roll here. So that we can address this unmet need here in November.
Got it okay.
And then just in regards to the exploratory exploratory cohorts I think it's five through seven can you just give us an update as to as to what's happening there or are they since they were exploratory to begin with and you guys are.
The head count reductions.
Reevaluating the programs.
Could those also potentially be be closed.
Yeah. So what I was trying to accomplish in my prepared remarks, with our strategies, we're going to look at unmet need prevalence in investment and when I look at.
What would be left would be the cohort five for the frontline her two population, which we will certainly keep for a number of strategic reasons and then I think when you start looking at fiction seven and you look at the need the prevalence and the cost of keeping a large zenith 20 study.
Open I think it really calls into question. If those are going to stay open we'll make that decision here very shortly we haven't we haven't finally aligned on it but as I'm thinking about the lens of strategy and how we need to expand our resources and focused our energies. There are other avenues that I think.
Present higher unmet need.
And a greater opportunity proposals be successful.
Got it okay that makes sense.
And then just switching gears to <unk>.
I'll just shorten it as FY <unk>, if you don't mind the F a BLA.
Thank you.
[laughter].
You know its six months within 30 days youre going to Youre going to know whether they've accepted it.
I thought that the majority of the issues. The large majority of the of the issues or deficiencies all has to do with the manufacturing plants.
Sure.
I could be wrong on that but it seems like they would have to go like right away and start doing in person inspections am I thinking about that correctly or is this something that I don't know that theres a lot of work that needs to be done.
Sure.
During the initial part of the review the inspection lines up getting done towards the tail end.
And then I just worry about things like delays.
Like we ran into your first I just wanted to kind of get your thoughts as to how this process correct, perhaps it's helpful.
Yeah.
Unpack that so the CRA all focused really.
On two things and identified manufacturing challenges both at the drug product facility and the drug substance facility sub.
Subsequently, we had a type a meeting with the FDA, where the issue is the drug product facility, which had nothing to do with the losses was clear and it was not a gating item to resubmission.
So really the sole challenge from the CRM all was the remediation efforts at the drug substance facility in Korea, and we have worked very closely with our partner on the remediation and capital plan.
That resulted from that initial inspection and ultimately announced.
<unk> announced today that we resubmit.
So a class two resubmission is what I was articulating at a 30 day acceptance in a six month clock. So that puts you around.
September.
And I think youre right and that the gating item as far as we know is the reinspection of that facility and typically that would happen at some point.
After the acceptance when they can get the Korean.
Now will there be challenges with them traveling to Korea, given the <unk>.
Given the Covid realities of what we had in the past I don't have a crystal ball, but I do know that the FDA is inducting international inspections today, we don't see it as.
As a barrier today, but we're going to keep an eye on it and we're looking forward to them centrally and getting to Korean to inspect.
<unk>.
Terrific great guys. Thanks, very much for taking the questions.
Yes.
Thank you. Our next question comes from the line of my own 90 from B Riley Securities. Your question. Please.
Hey, Matt.
Hi team. Thanks for taking my question and congrats on kicking out.
Nice progress on the regulatory front actually first question if I may ask on Dr.
Doctor here Max data recently presented have you approached or have been approached by any of the <unk>.
Companies did.
Start doing some initial dose finding work.
For the two.
Combination got it.
Yeah, Great question Mike.
As you know K Ras mutations in lung cancer long been thought to be Undruggable now, we find ourselves with one product on the market.
Other under active review and several others and in development and I think each of them have a number of combination work ultimately trying to enhance the race and differentiate them.
Work that was presented at the Triple meeting and it is certainly interesting we are in conversations with a number of them intend to attend.
Tend to act on it.
It's really the.
Strategic ethos of where we want to take this asset and that there is a big unmet need and the patient population. There is certainly prevalent so.
More to follow.
Okay, Great and then.
On the frontline phase three study that you guys are thinking about it.
Could you just give me a little bit of color, what what could we be competitive there.
And what sort of.
Bond trade, our PFS kind of endpoints you might be looking at.
And then I assume this is going to be H B I D.
Are you going to look at in that in that setting.
Well, let me, let me clarify that one so.
Our phase III program is really conditional on us having a conversation with the FDA. So we tried to provide just a broad range of outcomes of what could happen with that but we believe we have a successful cohort.
And will mentioned, we will talk about the TMR at a later date, but I think we need to go sit with the FDA.
And talk specifically about the frontline indication and I think that would ultimately refine our regulatory strategy and at that point, we would come back to you and say here's the path, which could range from Theres, a feast appraised III program as necessary and here's a comparator likely chemotherapy.
The doublet plus or minus IL.
Or if there is an accelerated approval a different path. So we're simply saying we want to we want to go sit with the FDA at this conversation and then update our regulatory strategy post that need.
So maybe just following up on that should we just assume that there's going to be spend around one phase III study this year, which is the.
The study that FDA required forever.
<unk> put it actually it approval it has to be Android to a certain extent that yes. It.
That's absolutely fair.
Okay and have you.
Just in terms of.
Update out bids for the rest of the year.
When should we expect to hear more on the.
Cohort four it might be and then also some.
Other data from cohort five is on the on the liabilities, but mostly Gwen building.
So obviously we are.
Indicated.
I think in my answer a little earlier, so we're going to update.
You on the <unk>.
No.
Answering a lot of the questions you raised there.
At a later date, we're just not going to go there today.
As to the.
Other cohorts in arm in the dosing work that we've done there.
There is a number of communication that we will do.
<unk> in the future.
I'm just not ready today to give you.
The exact time.
But we're working obviously.
Usually we present all of our data at appropriate scientific venue win, especially now that some of them are reopening for in person then we certainly look forward to.
Add to the body of evidence supporting.
The.
<unk> it because the post.
Yeah. Thanks for taking my question and I look forward to definitely seeing you in person at one of these conferences and good deal would be very much best and I wish you all the best for your next chapter.
Thank you. Thank you thanks, Mike.
Thank you. This does conclude the question and answer session of today's program I'd like to hand, the program back to Tom for any further remarks.
Thank you all for your participation on today's call and your interest in extra did you have any further questions. Please feel free to reach out at any time.
Have a great day.
Yes.
Thank you, ladies and gentlemen group participation in today's conference. This does conclude the program you may now disconnect good day.
[music].