Q3 2022 Spectrum Pharmaceuticals Inc Earnings Call
Yeah.
The conference will begin shortly to raise your hand during Q&A you can dial star one one.
[music].
Good day, and thank you for standing by and welcome to the spectrum Pharmaceuticals third quarter 2022 earnings call. At this time all participants are in a listen only mode. After the speaker's presentation there'll be a question and answer session TUSK.
To ask a question during the session you'll need to press star one one on your telephone.
Please be advised that today's conference is being recorded I would now like to hand, the conference over to your speaker today, Michael Gray Powell Executive Vice President and Chief Business Officer. Please go ahead.
Thank you operator, welcome to the spectrum Pharmaceuticals third quarter 2022 earnings call with me on today's call are spectrum, President and Chief Executive Officer, Tom Riga.
Executive Vice President and Chief Medical Officer, Dr. Francois Lebel, Executive Vice President and Chief Financial Officer, Nora Brennan.
And your vice President sales and marketing.
Earlier today spectrum issued a press release detailing its financial results for the three months ended September 32022.
This press release and a webcast of this call can be accessed through the Investor Relations section of the spectrum.
Website that SPP Iraq Stockholm.
Before we get started I would like to reference the notice regarding forward looking statements included in today's press release.
Please notice emphasizes the major uncertainties and risks inherent in the forward looking statements.
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 expressway expressed or implied by such forward looking statements.
A telephone replay will be available shortly after completion of this call. The archived webcast will be available for one year on our website at SPP Rx dotcom.
So the benefit of those who may be listening to the replay or archived webcast.
Call. It held on November 10, 2022.
Since then spectrum may have made announcements related to the topics discussed so please refer to the company's most recent press releases.
SEC filings and with that I'll turn the call over to spectrum, President and CEO Tom Riga.
Thanks, Mike.
Soon everybody and thank you for joining us on today's call.
Third quarter was very busy for the company highlighted by two significant regulatory events.
All with the signing of a strategic financing agreement that improve the balance sheet.
Each of these topics will be covered on today's call.
I am thrilled that the FDA approved Ramadan on September nine and in less than six weeks, we were able to make the product commercially available to our customers.
As of October 18th Walter Don is commercially available.
And I am pleased that the first commercial sale happened within days of availability.
This marks a significant accomplishment for spectrum and our partner at Hanmi Pharmaceuticals.
We now turn our focus to being a commercial organization.
The market opportunity. We are entering is the largest in spectrum history, and one where our leadership team has extensive experience.
The estimated $2 billion long acting growth factor market is both competitive and complex, but we feel spectrum is uniquely qualified to capitalize on this significant opportunity.
There are several factors working in our favor that will allow us to maximize the launch trajectory of Ramadan.
First it has proven to be safe and effective in two large phase III studies.
Additionally, we are launching with a full suite of resources to support patients and provide customers with the best possible experience.
And finally, we hired a strong team with extensive oncology market knowledge customer connectivity and learnings from in depth market research.
Let me share with you some of the details.
<unk> is a novel product with a unique molecular structure and has proven to be safe and effective in over 600 patients in the clinical program.
The incidence in duration of severe neutropenia is a leading indicator that can predict downstream febrile neutropenia and associated complications.
In two large phase III head to head studies woven on demonstrated an effect on both the incidence and duration of severe neutropenia and demonstrated non inferiority versus the market leader Neulasta.
Having a safe and effective product is the foundation of commercial success.
<unk> is not a biosimilar and is the first full BLA to enter the long acting growth factor space in over 20 years.
An estimated $1 1 million units of long acting G. CSF are administered in the United States every year.
And the market is fairly evenly split into three segments.
Community oncology 340, <unk> hospitals, and non 300 <unk> hospitals.
Right now Neulasta represents 60% of the market, while Biosimilars represents 40.
There are currently four biosimilars available on the market with two driving a disproportionate concentration of their share.
The product mix is evolving as the on body devices lost significant share over the first over the past few quarters.
Providers are open to change and we believe that our strategy will enable us to compete across the segments.
We've done a tremendous amount of qualitative and quantitative research with oncologists buyers and payers to understand what drives behavior.
In the early goings the community oncology segment will likely be the fastest path to a robust launch trajectory.
Over the past several years community oncology practices have been facing headwinds, which is aligned to practice consolidation and acquisition by hospitals.
Consolidation as a result of a more centralized decision making.
This segment is receptive to tailored contracting enable to make nimble decisions across their networks.
Historically, the long acting growth factor market was stable and dependable as it relates to average selling price and reimbursement dynamics.
With multiple products competing in the space is created an unpredictable business climate for this segment to manage their operations.
This unpredictability is driven by the fact that the innovative product and the Biosimilars are dependent on one another's discounting decisions, which are made across multiple stakeholders.
Now more than ever customers are looking for solutions that provide the predictability and managing their growth factor business in the near and long term.
Well the dog in a novel product that is not a biosimilar offers independent reimbursement not tied to the innovator product or the biosimilars.
Ultimately this means that we will have more flexibility on pricing contracting and discounting decisions that will offer customers greater visibility into their near term and long term business decisions.
Finally, the community oncology segment has high utilization of patient access and support programs and we are bringing a comprehensive offering to the market.
We have taken the time to understand the patient journey and the financial burden on cancer patients and have built a best in class customer support system that will include co pay assistance reimbursement support and dedicated employees to help ensure our customers and ultimately their patients have the optimal experience with.
All the data.
We will first established role bid on with community oncology practices, followed by 340, <unk> and non 300 <unk> hospitals, we have a comprehensive strategy, which will enable us to compete successfully in the evolving oncology ecosystem.
Key to this strategy was to build a strong and efficient commercial team with extensive oncology experience and significant customer relationships.
The commercial team includes personnel in sales marketing access and reimbursement commercial operations and medical affairs, we have already hired nearly all 40 targeted physicians.
Team is fully trained and actively selling and executing our launch strategy.
How big is it competitive.
Relative advantage in an environment, where access is increasingly more restricted and face to face time in front of customers is that a premium.
We are confident that the people that we hire and the plan that we have developed gives us the best opportunity to capitalize on the launch of Ramadan.
Turning now.
The NDA, which is under active review at the FDA with a <unk> date of November 24th.
We had an <unk> meeting in September and received a negative vote of 9% to four.
This obviously was not the outcome, we had expected and we continue to believe that this product could present, a meaningful treatment option for patients with this rare form of lung cancer for whom other treatments have failed.
While we cannot predict what the FDA will ultimately decide we are planning for various outcomes in particular, one in which we do not receive approval.
In the event of an unfavorable determination, we intend to be pragmatic in our approach, which will include further managing costs and implementing organizational adjustments. We will continue to act in the best interest of the company our shareholders and most importantly, the patients who depend on our medicines.
We will provide timely updates on the <unk> program. Once we received word from the FDA.
In the meantime, we are heavily focused on the successful launch of Ramadan and as you'll hear from Nora we have just over $100 million in cash and are very well capitalized to execute on our strategy with that let me turn the call over to Laura to review our financials. Thank you Tom.
Third quarter of 2020 total research and development expenses were $13 3 million as compared to $29 million in the same period in 2021.
The decrease of $7 5 million is primarily due to the program's benefits Ramadan as well as a decrease in personnel expenses of $3 million.
The strategic restructuring that began in January of 2022.
Selling general and administrative expenses were $8 3 million in the quarter compared to $12 2 million in the same period in 2021.
The decrease of 4 million was primarily due to lower costs associated with employee compensation and benefits and other head count related expenses.
The reduction of workforce in January in addition to decreases in stock based compensation.
The net loss for the quarter of $29 921, 9 million from continuing operations or <unk> per share compared to a net loss of $33 1 million a 21 21.
Per share in the comparable period in 2021.
Operating cash burn was approximately $18 million in Q3 as compared to $25 million in the same period last year.
This reduction is part of our ongoing strategic effort to reduce the overall cash burn of the company, while optimizing our investments and late stage assets.
We ended the third quarter with approximately $103 million in cash plus marketable securities, which includes $30 million drawn down as part of the $65 million of debt.
Let me close with SLR capital partners during the quarter.
Access to the additional $95 million of financing will be made available in three tranches and subject to achievement of Prespecified regulatory and financial milestones.
Chances are available for drawdown at our discretion at various points in time November 15 2023.
With this financing and cash on hand, we believe that we have the reason to fund the company operations through 2024.
And with that operator, please open the line for questions.
Thank you as a reminder to ask a question you will need to press star one on your telephone.
Please standby, while we compile the Q&A roster.
One moment.
First question comes from.
I'm sorry.
Maury from Jefferies. Your line is open.
Hi, This is Kevin Sterling on for Maury.
Let me update and thanks for taking my questions.
First question was just on what information you're going to be tracking during the launch and what metrics are you going to provide to the street.
On the next earnings call and going forward and then if you have any early thoughts on when you would be able to provide guidance as well.
Hey, Kevin how are you all start I'll start here, we're obviously thrilled with the approval of the launch having the product be available.
The early receptivity.
We don't plan on providing revenue guidance here today to.
To your question, we're going to have a lot of metrics that we will be tracking internally I think the one that's ultimately most important and relevant to the street here will be revenue that we will be.
In reporting here as of the fourth quarter and onward.
We will also be providing relevant metrics as it relates to.
Customer reach as well as well as access that will happen over the course of launch, but I think the revenue minus one that I think will be most relevant here in the near term.
Okay, great. Thank you Tom and then just.
Follow up question for.
Ramadan.
Priced at a slight premium to most of the biosimilars, but less than Neulasta can you just elaborate on the payer feedback.
And sort of market research that makes the price you pick the sweet spot for commercialization and then if there is any other key points of differentiation that your differentiation that you're pointing out besides pricing that had been resonating with customers so far.
Yes, I think I think foundational.
The safety and efficacy of the product has to resonate and I think early feedback as it is I think having.
Really robust phase III program of over 600 patients that I think is.
That's that's foundational.
Lot of research went into pricing I think we are launching this as a brand. It is an innovative BLA and we made that decision to be 28% lower than the other innovative product I think what you were referring to.
Some are somewhat of the average selling price and I think it's important to differentiate the two our WAC price of the wholesale acquisition price that is at a 28%.
The reduction from the other innovative product and we thought that based on all of our research with customers with Payors that enabled us.
<unk> spot to have our customers be receptive to the product as well.
Our ability to gain access.
Great. Thank you and I'll hop back in the queue.
Thanks, Kevin.
Okay.
Thank you and we have a question one moment.
From Ed White with HC Wainwright Your line is open.
Good evening, Thanks for taking my questions.
Hey, Ed.
Hi, Tom.
So just a couple of questions.
On the launch have you can you give us any feedback from the payers has there been any sticking points.
As far as the payer scale or does it look like it's going pretty smooth.
Ed. Thanks for the question I think as it relates to payers. We spent a lot of time in advance and have engaged payers, but I think it starts with who is your customer and that seems like an easy question, but it's a very important one strategically and for US we believe the customer is the <unk>.
<unk>, who is ultimately treating patients and I think a lot of that work ultimately resides there. We have 49 targeted payers that represent over half of the covered lives that are relevant in this particular marketplace and we have understood their expectations the <unk>.
Time of their contracts. Some are annual some are semiannual. So each one will be evaluated strategically. So I think we have a good idea of what their what they are expecting how are how we plan to approach it and our strategy here is to be clear on who our customer is and then strategically contract.
With payers as we engage those particular customers and their books of business.
Okay. Thanks, Tom.
And just look.
Looking forward, maybe a question for <unk> just with the launch I was wondering if there's any.
Guidance, you can give us on SG&A costs for the fourth quarter.
Would we expect to see a big bump in the fourth quarter or should we see something expect it more to be over the.
The next few quarters.
And then on R&D.
Much the same question here, how should we be thinking of R&D spend.
Going forward. After these two rolled it on and Posey.
Is there any guidance you can give us on that thank you.
Yeah, Let me let me start hopefully it can be helpful. And then neuro will jump in here, So I think first and foremost.
Our core tenants that we've had since January has been to really scrutinize the balance sheet and reduce the operating cash burn of the company.
So I think if you look at the burn rates of 2021 and even <unk>.
Starting in 2022, the company was burning somewhere in the neighborhood of $30 million a quarter and I think this quarter youre seeing that burn rate goes to $17 $9 million, which I think speaks to the discipline that we're implementing to ensure we are making thoughtful decisions in our investments as it relates to.
Our late stage assets, because we are fully funded for the launch of a lot. This in <unk> and that is the that is the focus of where we go as you think about the fourth quarter, there will be an uptick in SG&A costs, we have we have not given.
Our guidance on that one, but I think if you think about the base of what we had an incremental ftes that we've added is somewhere in the neighborhood of 20% to 25, when we start ramping the commercial organization to.
<unk> 40, and I think the specific question on R&D I think that's one that our plant until we have visibility into the Fda's ultimate decision on <unk>, because I think that is an important component to answer that question accurately. So we have we are prepared for.
For that decision and we will make it and timely in new order and we'll be back in touch with you here the not too distant future, which I think will give you more color into how we're thinking depending on the ultimate outcome.
And Tom you said Youre ready proposed.
If theres a positive outcome there.
Does that include both manufacturing of the product are you ready on that end.
And also as far as the sales force goes.
Yes. So I think there is I think coming out of <unk>, obviously, we had expected a different outcome there and.
Having a 94 vote, we fully understand that <unk> is not the.
The judge and jury here FTA is but I think history has.
These nuggets of truth, and 80% of the time they seem to follow the ore that zone. So we are obviously preparing for all of the potential outcomes up to and including.
<unk> approval and I think in both of those scenarios, we are going to be prepared to be pragmatic and make decisions quite quickly.
Thanks, Tom and then my last question if I may.
Just on the pipeline, how should we be thinking about the pipeline going forward.
Regardless of the pose the outcome are you looking at BD opportunities is there anything internally, we should be thinking of but what's your big picture overall strategy for the pipeline.
Yeah. Thank you Ed Great question, I think big picture for the company.
Obviously thrilled to have the approval of rule the Dol not for just the approval before what opportunities success would bring as that launch.
And default so.
We will have clarity with that program here in the not too distant future, but ultimately the future funding or business development, which really is the core of our company.
The core of what we believe is important to advance the future of the company all of those things are largely contingent upon the successful execution of what we have in front of us and that's why being crystal clear in our focus.
Our balance sheet, our efforts and our energy to really ensure the successful launch of <unk> is critically important to both the near term and long term strategy of the organization because clearly having a commercial product is great, but having the capital to enable the company to <unk>.
Invest further into business development and expansion or other M&A type activity is certainly.
Of interest as we go forward.
Great. Thanks for taking my questions.
Thanks, Ed.
Thank you.
And our next question comes from per car I go wall with Cantor Your line is open.
Alright, thanks for taking my questions.
First of all pricing Tommy.
Tom you mentioned the pricing of 30% discount to branded Neulasta, So maybe talk about.
How would you expect ASP at steady state to Pan out do you what do you expect.
Fair to assume that the level of discounting.
And your Asps will be much higher than both Biosimilars and granted neulasta, given our European very strategic with our peers and I had a follow up.
Yes. Thanks for the question for Carl I think I think important to your <unk>.
To your question is the fact that the unit demand for growth factor has remained unchanged for the past several years. There is $1 1 million units of growth factor Thats administered and that demand has been consistent with drives that market down ultimately is the reductions in ASP that is largely resolved.
The innovator and the Biosimilar being.
<unk> tied together and they are discounting decisions I think having a unique ability to disc.
Discount price.
Product independent as a unique chemical entity enables us to make those decisions strategically. So initially the wholesale acquisition price is the basis of reimbursement until average selling prices established that will happen over the first few quarters of launch and then after that when the <unk>.
Average selling price is established that as a direct and that is in our direct control with the discounting decisions that we ultimately make and those asps reportable discounts that we put into CMS. So we will be immunological control of the discount put into the market and then the subsequent decline in average sell.
The price will be ours to manage.
Got it thanks for the color and maybe you're talking about the copay on patient assistance program. So maybe if you can provide more details around that.
If there are any differences.
Between your programs and some of the other products in the market.
I think it's important to to have if you're treating this like a brand I think customer expectations are that youre thoughtful of the entire patient journey and we have them. So our programs as I had mentioned in my prepared remarks is going to be a full suite of programs both axis.
Access and reimbursement program co pay assistance program both in the federally funded a non federally funded concentrations there are differences in how that's executed but we will we will have both the programs themselves as well as dedicated staff that will help customers navigate so rather than compare and contrast, what.
Other other products have I think the way I would position. It here is we are bringing a compelling offering to the market treating this as a brand and I think our customers are receiving it well here out of the gate.
Okay. Thank you for the color Tom.
Looking forward to the next update.
Thanks, a lot.
Thank you and there are no other questions in the queue.
I would like to turn the call back to Mr. Tom Riga for any closing remarks.
Thank you for your participation on the call today and your interest in spectrum Pharmaceuticals, it's been a busy and active time in the company and we're excited to give you further updates on the launch of Ramadan here as we move forward. So we will if you have any questions. Please feel free to reach out and we'll be in touch.
This concludes today's conference call. Thank you for participating you may now disconnect.
The conference will begin shortly to raise your hand during Q&A you can dial one one.
[music].
Hmm.
[music].
Yeah.
Yes.
[music].
Okay.
Okay.
Okay.
Okay.
Yes.
Yes.
Okay.
[music].
Okay.
Yes.
Sure.
Okay.
[music].
Okay.
[music].
[music].
[music].