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Spectrum Pharmaceuticals, Inc. (NASDAQ:SPPI)
Q2 2019 Earnings Call
Aug. 8, 2019, 4:30 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Ladies and gentlemen, please stand by, your conference call will begin momentarily. Once again, thank you for your patience and please stand by.

And good day ladies and gentlemen, and welcome to the Spectrum Pharmaceuticals 2nd Quarter 2019 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 follow at that time. If anyone should require assistance during the conference, please press * then 0 on your touchtone telephone. As a reminder, this conference call is being recorded.

I would now like to introduce your host for today's conference, Mr. Shiv Kapoor, Vice President of Strategic Planning, and Investor Relations. Mr. Kapoor, you may begin.

Shiv Kapoor -- Vice President of Strategic Planning and Investor Relations

Thanks. Good afternoon to everyone. Thank you for joining us today for Spectrum's 2nd Quarter 2019 financial results conference call. Our press release is available on our website at www.sppirx.com. Joe Turgeon, our CEO and President will start the call and provide an overview, followed by a financial update from our CFO, Kurt Gustafson, and a discussion of our clinical development progress from our CMO, Dr. Francois Lebel.

Before we get started, I would like everyone to please refer to the notice regarding forward-looking statements included in today's press release. This notice emphasizes the major uncertainties and risk inherent in the forward-looking statements that we will be making this afternoon. These statements are not guarantees of future performance, and undue reliance should not be placed upon 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.

Joseph Turgeon -- Chief Executive Officer and President

Thank you, Shiv, and hello to everybody on the call. I appreciate your interest in Spectrum. I'm really excited to talk to you today. We made significant progress in the first half of this year as we strategically shifted from small niche products to higher-value targets. Our focus is on our late-stage oncology assets, poziotinib, and Rolontis, both of which have major milestones in the next few months.

For poziotinib, we completed enrollment of both Cohort 1 and Cohort 2, either of which could be used as pivotal studies in a regulatory filing. We are looking forward to the top line results of Cohort 1 in the 4th Quarter of this year. Results of Cohort 2 are expected by mid-2020.

We have a mutation strategy for poziotinib, and new scientific information is guiding the expansion of the poziotinib program. Based on pre-clinical data, we expanded our mutation strategy beyond exon 20 and into the treatment of enumerative failures and atypical mutations. There is a significant unmet medical need in those areas, and poziotinib may be uniquely suited to offer patients much-needed solutions.

We're letting the science guide our development program. In entering these new areas and exploring further the role poise in these difficult to treat mutations.

Regarding Rolontis, our late-stage asset for use in chemotherapy-induced neutropenia, we recently had a productive meeting with the FDA and planned to submit the BLA in the 4th Quarter. I want to remind you that we have very strong efficacy and safety data coming out of two large Phase 3 trials. If approved, this product will compete in a multibillion-dollar market that I and many members of our management team have deep expertise in. We look forward to a successful submission and its ultimate approval.

In Q2, we also completed the acquisition of fusion inferior technology platform, or FIT, which places us in the MENO oncology space. This deal is consistent with our commitment to focus on innovative oncology products in areas of high unmet medical need.

Overall, Spectrum's in a great position. We're on the cutting edge of science. We have a promising growing pipeline with significant near-term milestones. We are well-capitalized, and we have a strong team. We are focused on delivering on the goals we've set, and I look forward to continuing the momentum into the 2nd half of the year.

With that, I'm going to turn over the call to our CFO, Kurt Gustafson, to go over the financials.

Kurt Gustafson -- Chief Financial Officer, Executive Vice President, and Principal Accounting Officer

Thanks, Joe. I'll begin with some comments on continuing operations. Our SG&A expense for the 2nd Quarter of 2019 was $17.2 million, and R&D expense was $17 million. R&D expense included a 1-time charge for the licensing of Immune Gene's FIT technology of $2.8 million. Our net loss from continuing operations was $28.8 million. However, on a non-gap basis, which primarily backs out stock compensation costs as well as the licensing fee paid to Immune Gene, our loss was $25.2 million.

The income from discontinued operations was $388,000 and represented various items recorded in the 2nd Quarter that are related to the commercial business that was sold to Acro-Tech on March 1st.

As we look toward the 2nd half of the year, I would expect that our SG&A expenses would stay similar to current levels. However, we do expect R&D expenses to increase as we expand the poziotinib clinical development program and invest in our commercial manufacturing for both poziotinib and Rolontis.

We ended the quarter with $282 million in cash plus marketable securities. Based on our increased cash balance, we started investing in certain short-term debt securities, which is why you'll see our marketable securities has grown this quarter. That total of $160 million in marketable securities represents these debt instruments, as well as our equity position in taxing.

The sale of our commercial business brought in a significant amount of cash to the company, and with $282 million in total liquidity, we have plenty of runways to continue the development and commercialization of our late-stage assets.

With that, let me now hand the call over to Francois to cover updates on our clinical programs.

Francois Lebel -- Chief Medical Officer

Thanks, Kurt. Hello, everyone. I'm going to start by providing an update on our late-stage asset poziotinib. The pozi development program is focused on investigating the treatment of exon 20 insertion mutation in non-small cell lung cancer. Exon 20 mutations are among the most difficult to treat, and currently have no FDA approved therapy. These patients and their physicians are in need of effective treatment options.

As Joe mentioned, we expect the top line results from Cohort 1 in the 4th Quarter. This cohort is evaluating patients with previously treated EGFR exon 20 insertion mutations. Cohort 2, which is evaluating pozi in previously treated R2 patients, reached full enrollment in Q2. This was an exciting milestone as it happened 6 months ahead of schedule and speaks to the clear unmet medical need.

We are pleased with the enrollment in Cohorts 3 and 4, looking at first line treatment in both EGFR and R2 patients with exon 20 insertion mutations. We recently announced 3 additional cohorts in the xenia 20 trial that are actively recruiting patients. Cohort 5 includes previously treated or treatment naïve non-small cell lung cancer patients with EGFR or R2 exon 20 insertion mutation. We opened these cohorts because there's been numerous requests to enter our fully enrolled cohorts 1 and 2. This cohort helps us address these requests while continuing to generate useful data.

Cohort 6 includes non-small cell lung cancer patients whose tumor progress while on treatment with first line imatinib has developed new EGFR mutations. Recent pre-clinical data suggest that poziotinib may be active against many of these EGFR dependent resistant mechanisms.

Cohort 7 includes non-small cell lung cancer patients with a variety of less common mutations in EGFR and R2, exon's 18 to 21, or the extracellular or transmembrane domains for which there is no effective therapy. And we have strong in vitro evidence of poziotinib activity.

By the way, you will see the preclinical data supporting Cohorts 6 and 7 at the upcoming World Lung Meeting in Barcelona, presented by Dr. Haymac's group from MD Anderson. All 3 new cohorts are actively recruiting.

Now, shifting to Rolontis, at ASCO, we presented a poster integrating the data from both of our pivotal Phase 2 Rolontis clinical trials, which included a total of 643 patients. The integrated analysis of efficacy and safety was consistent with results from the individual studies, demonstrating that Rolontis was noninferior to Pedestalling in the reduction of the duration of severe neutropenia.

Regarding our BLA file, we recently had a productive meeting with the FDA to discuss further their expectation around module 3, which is the modules focused on manufacturing. Based on the outcome of that meeting, we expect to submit the BLA in the 4th Quarter of this year.

Now let me shift to the work on the newly acquired FIT platform. This is a welcome addition to our pipeline as we enter the immune-oncology space, an area that I know well. The FIT platform creates a new class of biotherapeutics, engineered by fusing interferon-alpha with ammonal clonal antibody targeting a specific invalidated tumor antigen. Interferons are very potent cytokines that are well established as cancer therapeutic but have historically been associated with significant systemic side effects. Pre-clinical data suggests that the FIT technology has the potential to maintain efficacy and minimize toxicity.

As you can see, we have a growing and well-balanced pipeline. The team is executing on our goals and energized about our path forward.

Now, I'll turn it back to Joe.

Joseph Turgeon -- Chief Executive Officer and President

Thank you, Dr. Francois. We made a lot of progress in the 2nd Quarter. We have a growing oncology pipeline, with important near-term milestones for both poziotinib and Rolontis, and we have a promising novel immune-oncology platform. We look forward to major catalysts in the coming months.

...

And with that, I'd like to open the lines, operator, to questions.

Questions and Answers:

Operator

Thank you. Ladies and gentlemen, if you have a question at this time, please press the * and then the No. 1 key on your touchtone telephone. If your question has been answered or you wish to remove yourself from the queue, please press the # key. Again, that's * then 1 to ask a question. To prevent any background noise, we ask that you, please place your line on mute once your question has been stated.

Our first question comes from Alethia Young with Cantor Fitzgerald. Your line is now open.

Alethia Young -- Cantor Fitzgerald -- Analyst

Hi, this is Emma on for Alethia. For the new extension Cohort 5, could you just walk us through the dosing regimen and whether there are any differences between Cohorts 1 and 2?

Joseph Turgeon -- Chief Executive Officer and President

Yeah, hey, Emma. Why don't we have Dr. Francois walk you through that?

Francois Lebel -- Chief Medical Officer

So, Cohort 5, the primary reason why we have Cohort 5 is as I've indicated, we've received numerous requests for compassionate use from investigators with patients with exon 20 mutations, and they want to enroll them in Cohort 1 and 2. And those studies or cohorts are closed. So we had to have a mechanism to provide access under controlled condition. And that is exactly the main reason why we're doing this.

It will give us additional data, that is always useful for any drug. When you go to the market, the more data you have, the better it is.

Alethia Young -- Cantor Fitzgerald -- Analyst

But I guess this is really on the dosing. Is the dosing regimen the same as Cohorts 1 and 2?

Francois Lebel -- Chief Medical Officer

Oh, sorry Alethia, so the dosing regimen, we're exploring 3 dose levels. We're going to be randomizing patients to 10 milligram, 12 milligram, and 16 milligrams per day. And we're allowing patients that would start on a lower dose to potentially escalate if ever there would be signs of progression.

Alethia Young -- Cantor Fitzgerald -- Analyst

Thanks, that's helpful.

Operator

Thank you. And our next question comes from Maury Raycroft with Jefferies. Your line is now open.

Maury Raycroft -- Jefferies -- Analyst

Hi, everyone. Good afternoon and congrats on the progress and thanks for taking my questions. So my first question is on Rolontis. Just wondering if you can comment on any gating factors remaining prior to submitting the BLA.

Joseph Turgeon -- Chief Executive Officer and President

Hi, Maury. How are you doing? This is Joe. Good to hear from you. Listen, we are aligned with the FDA, we had our meeting, we got aligned. We're being through, we're being deliberate, and we're filing in the 4th Quarter as we said. The questions that we had answered were in module 3, which is in the CMC section only. And again, we're being, like I said, through and deliberate and plan on filing this in the 4th Quarter.

Maury Raycroft -- Jefferies -- Analyst

Got it. Okay. And then I was wondering for Cohorts 6 and 7 that were added to the pose study, just wondering if those are independently powered, similarly to Cohorts 1 through 4? And do you have any thoughts whether Cohorts 6 and 7 could have an accelerated development path?

Francois Lebel -- Chief Medical Officer

Yeah, good question. So we have not fully powered those study deeds. The cohorts 5, 6, and 7 are exploratory in nature that gives us a little more flexibility. And there is no target endpoint that is defined here. We're trying to translate exciting data that we've seen preclinically, as I mentioned. And we want to see if it translates clinically. If it does, obviously, we would potentially modify those cohorts or do additional studies. But we need to confirm whether or not we can see the same signal in patients.

Maury Raycroft -- Jefferies -- Analyst

Got it. Understood. Thanks for taking my questions and I'll hop back in the queue.

Operator

Thank you. And our next question comes from Ed White with HC Wainwright. Your line is now open.

Ed White -- HC Wainwright & Co. -- Analyst

Hi guys. Thanks for taking my question. Just a question on Cohort 5. Since this is similar to Cohorts 1 and 2, does this slow down the launch timeline? Do you think the FDA is going to want to look at this data before looking at Cohorts 1 and 2 for approval, or it has no impact?

Francois Lebel -- Chief Medical Officer

Sure, Ed. So the short answer is no, we don't think it's going to delay us at all if anything this will be helpful. So remember Cohort 1 to 4. Actually, 1, 2, 3, 4 are -- Cohort 1 and 2 are fully enrolled, 3 and 4 are very nicely enrolling. And when they complete, then these patients could also go in Cohort 5. So it's just additional data that we're gathering here. There is no requirement in any kind of way. They're independent of the pivotal trials that are Cohort 1 to 4. So this would be simply additional data that would provide additional safety information, etc. It's not part of a request through the FDA, we're doing this on our own.

Ed White -- HC Wainwright & Co. -- Analyst

Okay, great. Thanks, Francois. And now just a question post the TAK788 data to ask though. I just want to get your thoughts on what that data, versus the pozi data, if both of them hold up what this could mean for the market, so maybe this is for Tom. And also what the market is going to look like? And then any thoughts on the discontinuations of 788 due to adverse events which were higher than poziotinib.

Thomas Riga -- Executive Vice President and Chief Operating Officer

Hey, Ed. It's Tom. We obviously looked at that data in detail. I think it's pretty early. It looks like that study is starting. Our position we feel pretty strong about with the data readout in Q4. And is well add in the development lifecycle with poziotinib. So we'll have to see what that market looks like.

I think what it really says is that there is a real unmet need for this patient population as more and more compounds come into the fold, I think it speaks to the solutions that patients need, and we're pleased to be at the forefront of that.

Ed White -- HC Wainwright & Co. -- Analyst

Great. Thanks, Tom. And then perhaps the last question, just a question on the basket study, can you give us any update there as for maybe the number of indications that you're looking for or which indications and the size of the study? Or are you going to focus on the second or third line or any other information you could give us would be helpful, thank you.

Francois Lebel -- Chief Medical Officer

Right. I think unfortunately the only information I can give you is that we absolutely intend to have a basket study at the end of the year. And we are currently working, communicating, with the FDA as to the exact nature of the basket. But I can't today give you more information. We'll obviously give you more information when things are finalized.

Ed White -- HC Wainwright & Co. -- Analyst

Okay, no problem. Thanks, Francois.

Operator

Thank you. And our next question comes with Michael Schmitt with Guggenheim Securities. Your line is now open.

Charles Xu -- Guggenheim Securities -- Analyst

Hi, this is Charles Xu on for Michael Schmitt. Thanks for taking the questions and congrats on all the progress. First, on xenia 20, how would you characterize the enrollment timeline of Cohorts 3 and 4? Can we expect similar timelines or dynamics as we've seen with Cohorts 1 and 2? And one angle I'm coming from is if you look at some of these other trials and lung cancer evaluating TKIs, even as they get to the more front line setting, we're still seeing a lot of more patients who come of off platinum-based chemotherapy, thanks.

Francois Lebel -- Chief Medical Officer

Right. So I can't give you a large amount of details here other than to say it's recruiting nicely according to our expectation. I agree with you that we're aware that first line studies, our data might be slightly more difficult to recruit, but so far, it's not been an issue. And we're progressing well as expected. So I, unfortunately, can't really tell you much more than that.

Joseph Turgeon -- Chief Executive Officer and President

Yeah, Charles, the only thing we can say is that we're very pleased with the enrollment to date and we continue to enroll is what I can tell you.

Charles Xu -- Guggenheim Securities -- Analyst

Okay, got it. And I think this was partially voiced over before, so apologies in advance if I'm asking you to repeat yourself. But regarding Cohort 5, it makes sense that you're providing pose access for patients that would have normally enrolled in Cohorts 1 and 2 but can no longer do so. What are the potential implications for Cohorts 3 and 4? Is there any kind of potential where a patient that would have gone on 3 might go on 5 now instead and would that have any potential delay for 3 and 4? Or would you be able to supplement a dataset from 3 and 4 with a partial dataset from 5?

Francois Lebel -- Chief Medical Officer

Yeah, there's no conflict at all. We have to finish enrolling Cohort 3 and 4. And just like for Cohort 1 and 2, when they're fully enrolled, the patient will be eligible for Cohort 5. So they're not competing at all with one another.

Charles Xu -- Guggenheim Securities -- Analyst

Got it. That makes sense. And then the last question from me, regarding Rolontis, just a general question, how do you see the dynamics or the market size-shifting for GCSS as biosimilars continue their update? Thank you.

Joseph Turgeon -- Chief Executive Officer and President

Yeah, and I'm going to let Tom give you some color on that. What I will tell you is this Charles. In all of our modeling, we fully expected and modeled having multiple biosimilars on the market when we came to market, so this is not surprising or anything new, I'll tell you that. But Tom, why don't you speak to the market?

Thomas Riga -- Executive Vice President and Chief Operating Officer

Yeah, Charles. We're seeing rational pricing in the marketplace. It's not behaving like a typical generic marketplace as we would have predicted. And as we look at the dynamics and seeing how it's playing out; it makes us more excited to compete in this space. We think to have a novel solution entering the marketplace with the backgrounds of our leadership team, we'll be able to compete in that market. We're looking forward to getting this file in here in the 4th Quarter and having the opportunity to enter that ring.

Charles Xu -- Guggenheim Securities -- Analyst

Sounds good. And thanks again for taking the questions and for your time today.

Operator

Thank you. And our next question comes from Harshita Polishetty with B Riley FDR.

Harshita Polishetty -- B Riley FDR -- Analyst

Hi, good afternoon, everyone. Congrats on the progress and thank you for taking my question. I guess I wanted to ask about pose and other tumor types. I guess Ed already touched this with regard to the basket study, and I know you're not able to provide color on trial size and/or patient populations. But correct me if I'm wrong, but you're also looking at combinations, right? Are you able to provide any color on how you're thinking about potential combinations?

Francois Lebel -- Chief Medical Officer

Yeah. You're correct. We plan to start a combo study in the 2nd half as well. The only thing I can tell you in terms of the choice of the drugs that are going to be combined is that it's going to be a rational combination. In other words, where you would expect to have either pre-clinical data supporting the combination or you have reason to believe that mechanistically those two drugs would work well together.

The other thing is you always have to look for in combining drugs, you want to as much as possible not to have overlapping toxicity. So we're careful in our choice. But we're still on track to move forward with that.

Harshita Polishetty -- B Riley FDR -- Analyst

Right. Yeah, that makes sense. Thank you for the color.

Operator

Thank you. I am not showing any further questions at this time. I would now like to turn the call back over to Joe Turgeon for any closing remarks.

Joseph Turgeon -- Chief Executive Officer and President

Yes, thank you, operator. I appreciate everybody's interest and have a good day everyone.

...

Operator

Ladies and gentlemen, thank you for participating in today's conference. This does conclude today's program, and you may all disconnect. Everyone have a wonderful day.

Duration: 32 minutes

Call participants:

Shiv Kapoor -- Vice President of Strategic Planning and Investor Relations

Joseph Turgeon -- Chief Executive Officer and President

Kurt Gustafson -- Chief Financial Officer, Executive Vice President, and Principal Accounting Officer

Thomas Riga -- Executive Vice President and Chief Operating Officer

Francois Lebel -- Chief Medical Officer

Alethia Young -- Cantor Fitzgerald -- Analyst

Maury Raycroft -- Jefferies -- Analyst

Ed White -- HC Wainwright & Co. -- Analyst

Charles Xu -- Guggenheim Securities -- Analyst

Harshita Polishetty -- B Riley FDR -- Analyst

 

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