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Edited Transcript of SPPI earnings conference call or presentation 9-May-19 8:30pm GMT

Q1 2019 Spectrum Pharmaceuticals Inc Earnings Call

IRVINE May 21, 2019 (Thomson StreetEvents) -- Edited Transcript of Spectrum Pharmaceuticals Inc earnings conference call or presentation Thursday, May 9, 2019 at 8:30:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Francois Lebel

Spectrum Pharmaceuticals, Inc. - Chief Medical Officer

* Joseph W. Turgeon

Spectrum Pharmaceuticals, Inc. - President, CEO & Director

* Kurt A. Gustafson

Spectrum Pharmaceuticals, Inc. - Executive VP & CFO

* Shivpreet Kapoor

Spectrum Pharmaceuticals, Inc. - VP of Strategic Planning & IR

* Thomas J. Riga

Spectrum Pharmaceuticals, Inc. - Executive VP, COO & Chief Commercial Officer

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Conference Call Participants

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* Edward Patrick White

H.C. Wainwright & Co, LLC, Research Division - MD of Equity Research & Senior Healthcare Analyst

* Emma Kathleen Nealon

Cantor Fitzgerald & Co., Research Division - Analyst

* Maurice Thomas Raycroft

Jefferies LLC, Research Division - Equity Analyst

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Presentation

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Operator [1]

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Good afternoon, ladies and gentlemen, and welcome to the Spectrum Pharmaceuticals First Quarter 2019 Financial Results Conference Call. (Operator Instructions) As a reminder, this conference call is being recorded. I would now like to turn the conference over to your host, Mr. Shiv Kapoor, Vice President, Strategic Planning and Investor Relations.

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Shivpreet Kapoor, Spectrum Pharmaceuticals, Inc. - VP of Strategic Planning & IR [2]

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Thanks. Good afternoon, everyone. Thank you for joining us today for Spectrum's First 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 operations from our CMO, Dr. Francois Lebel.

Before we get started, I'd like everyone to refer to the notice regarding forward-looking statements included in today's press release.

This notice emphasizes the major risks and uncertainties inherent in the forward-looking statements that we will make 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.

Today's call will also include a discussion of non-GAAP financial measures, which should not be considered in isolation from or as a substitute for financial information presented in compliance with GAAP.

With that, let me hand the call over to Joe.

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Joseph W. Turgeon, Spectrum Pharmaceuticals, Inc. - President, CEO & Director [3]

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Thank you, Shiv. And thank you to everybody on your call for your interest in Spectrum. Q1 was a strong quarter with significant developments. We've made bold moves to strategically shift the company and jump start our evolution from a spec pharma company into a growing biopharmaceutical company.

This includes the sale of our legacy oncology portfolio, and just today, we announced the expansion of our oncology pipeline into immuno-oncology. We also continued to advance the development of our late-stage assets: poziotinib and ROLONTIS, the cornerstones of our company.

On the poziotinib front, we've made significant progress in our clinical trial, the ZENITH20 trial. Full enrollment of the previously treated EGFR cohort or cohort 1 was announced in early January, and we expect the primary analysis results in the fourth quarter of this year.

Regarding ROLONTIS, we continue to have productive discussions with the FDA and plan to meet with the agency in the near term. We are being thorough and deliberate in our -- updating our file, and we hope we'd have it to the FDA as soon as it is ready. We look forward to a successful submission and its optimal approval.

Now let me shift it to the deal that we announced today. We closed the deal of purchase the Focused Interferon Therapeutics or FIT platform, along with 2 early-stage assets of immune gene. We are now on the forefront of developing a novel class of FIT therapies in immuno-oncology.

Let me tell you why I like this deal and how it fits into our strategy. It's consistent with our vision. It's great science, good value, and it's the right fit for our company. When you look at the vision, it's consistent with our commitment to bring innovative products to serve several areas of unmet needs in cancer. The science is validated through collaboration with multiple world-class scientific organizations, which include UCLA, UPMC and the Leukemia & Lymphoma Society. It's a great value because the deal terms are highly favorable for our shareholders.

And finally, it fits as it complements our late-stage assets. Our team has considerable experience in this area, which will help also. Overall, this is a great deal for the company. I look forward to seeing the results of -- from the initial studies.

Dr. Francois is going to walk you through in more detail on the products and the platform. 2019's off to a strong start, and I'm proud to say that our strategy is taking shape. We're now a biopharmaceutical company with a growing oncology pipeline. And with that, I'm going to turn it over to Kurt for the financials.

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Kurt A. Gustafson, Spectrum Pharmaceuticals, Inc. - Executive VP & CFO [4]

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Thanks, Joe. The sale of our commercial product portfolio to Acrotech closed on March 1. And as a result of this sale, our financial statements will look a bit different than what you've seen before.

Under GAAP, the financial statements are split between continuing operations and discontinued operations, with discontinued operations representing the portion of the business that was sold to Acrotech.

As a result, you'll note that the product sales and cost of sales are missing off the face of our financials as these items are reported as discontinued operations.

Note that GAAP requires that we report all historical periods in the same manner.

With regards to continuing operations, our SG&A expense for the first quarter of 2019 was $16 million, and R&D expense was $21.9 million, which includes $9 million in purchases of ROLONTIS drug substance.

As a reminder, our accounting practice is to expense this inventory as R&D until the product and facility have been approved.

When that material is later sold, we'll report 0 cost of goods sold for this material, given that it was previously expensed.

We also had an $11.3 million loss in other income/expense due to an unrealized loss in the value of our equity interest in CASI Pharmaceuticals.

Our total loss from continuing operations was $39.8 million. However, on a non-GAAP basis, which primarily backs out certain severance-related costs and stock compensation costs, our non-GAAP loss from continuing operations was $29.3 million.

Post the close of the transaction, our cash position is even stronger. We ended the quarter with $277 million in cash and $33 million in marketable securities for a total of $310 million.

Included in this figure is $4 million of cash classified as restricted cash. This represents an amount held in escrow as part of the Acrotech transaction that is due to be released when certain post-closing performance obligations are met.

Regarding guidance, given that the launch of the ROLONTIS will be delayed relative to our previous expectations, we expect to postpone certain prelaunch expenditures that were planned for 2019. We plan to update guidance once the file has been accepted.

And with that, let me hand the call over to Francois to cover updates on the clinical programs.

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Francois Lebel, Spectrum Pharmaceuticals, Inc. - Chief Medical Officer [5]

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Thanks, Kurt. Hello, everyone. I'm going to start by providing an update regarding our late-stage asset, poziotinib.

The pozi development program is focused on investigating the treatment of exon 20 insertion mutations across tumor types.

Exon 20 mutations are among the most difficult to treat and currently have no FDA-approved targeted therapies. These patients and their physician really need new treatment options.

We are well underway with our pivotal, multicentric trial called ZENITH20. As Joe mentioned, we expect the primary analysis results from cohort 1 in the fourth quarter of this year.

Regarding the HER2, previously treated cohort, also called cohort 2, our guidance was that we would be fully enrolled by Q4 and enrollment is well ahead of previous expectations.

Currently, treatment options are very limited and prognosis, very grim for these patients. Poziotinib has the potential to fill a clear need for patients with this type of lung cancer.

In addition to cohorts 1 and 2 in previously treated patients, we are aggressively enrolling in cohorts 3 and 4, which are evaluating poziotinib as first-line therapy in both EGFR and HER2 patient with exon 20 insertion mutation.

Additionally, we're also planning to evaluate poziotinib in other tumor types and in combination where we have promising preclinical data.

As previously guided, we are looking to start these trials in the second half of this year. So more to come in the future.

Regarding ROLONTIS, we are refining our BLA file and anticipating meeting with the FDA in the near term.

Additionally, ROLONTIS data have been accepted to be presented in a poster session at ASCO in Chicago in June. These will be integrated data from our 2 Phase III trials with a total of 643 patients.

As previously reported, each one of our Phase III studies independently met their primary and secondary endpoints. We look forward to sharing the integrated data at ASCO.

Now let me shift to today's acquisition of the FIT platform and 2 early-stage assets.

This is a welcome addition to our pipeline in a space that I know well. The FIT platform creates a new class of biotherapeutics engineered by fusing interferon alpha with monoclonal antibodies targeting various validated tumor antigens.

Interferons are very potent cytokines that are well established as the immune form of therapy for cancers.

However, interferons have historically been associated with significant dose-related systemic side effects.

We believe that the FIT technology has the potential to maintain the efficacy and minimize toxicity.

These novel therapies have potential application as single agent or in combination with other rational therapies, including with checkpoint inhibitors.

The first asset is an antibody interferon fusion molecule directed against CD20. This drug candidate is in Phase 1 development being studied in relapse refractory non-Hodgkin lymphoma, including diffuse large B-cell lymphoma where a considerable unmet medical need exists.

In preclinical models, this fusion protein has been shown to add significant proapoptotic activity, and anti-CD20 interferon alpha is essentially a 2-pronged attack, whereby both CD20 and interferon-receptors-signaling pathways can be activated to induce tumor cell apoptosis.

Preclinical results suggest that anti-CD20 interferon alpha fusion protein have an improved therapeutic index while still exhibiting the ability to eradicate tumor cells.

The second asset is an antibody interferon fusion molecule targeting GRP94 or heat-shock protein.

This asset has demonstrated the potential for treating both solid and hematologic malignancies and is in preclinical development.

Our clinical team looks forward to an ongoing collaboration with UCLA, the discoverer of this platform. In the near term, we will complete the dose-escalation study of the fusion protein directed at CD20 and bring the anti-GRP94 to the clinic as soon as possible. We will update you on milestone in the future.

Poziotinib and ROLONTIS remain the cornerstones of our development portfolio. The new FIT platform, an asset, nicely expands the pipeline with early-stage but promising candidate.

Now I'd like to turn it back to Joe.

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Joseph W. Turgeon, Spectrum Pharmaceuticals, Inc. - President, CEO & Director [6]

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Thank you, Dr. Francois. I hope you see it's clear that Spectrum has made some major shifts in the first few months of 2019 and will continue to make bold moves to strengthen the company as we move forward. And with that I'd like to open it up, Operator, to questions.

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Questions and Answers

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Operator [1]

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(Operator Instructions) First question comes from the line of Alethia Young from Cantor Fitzgerald.

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Emma Kathleen Nealon, Cantor Fitzgerald & Co., Research Division - Analyst [2]

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This is Emma on for Alethia. On today's acquisition, I guess, just curious were you in the market for an I/O platform specifically? Or what was attractive about this opportunity versus others you might have looked at? And then just looking at the current pipeline and your cash balance, are you still looking to bring in any additional assets? And what would the ideal profile of those be?

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Joseph W. Turgeon, Spectrum Pharmaceuticals, Inc. - President, CEO & Director [3]

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Yes. I'll start and I'm going to let Dr. Francois also get involved. I think what we're looking for is fit -- it fits our vision.

We want to look for unmet medical need in cancer. That's the first thing we look at. We want validated science, obviously. Things that are synergistic and are fit, where we're going would fit commercially down the road with the drugs we have in oncology and hematology.

And that are -- we have the expertise to move forward as we have in the past.

So that's basically what we're looking for in oncology. And Dr. Francois, I'd let you to add from your perspective, if you'd like.

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Francois Lebel, Spectrum Pharmaceuticals, Inc. - Chief Medical Officer [4]

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Right. I think it just made a lot of sense, as Joe was highlighting to you. Immuno-oncology, as you well know, is kind of the way forward for oncology. And we happen to have a lot of experience in the company, including myself, where I've worked with a number of cytokine in the past and CAR therapy, for that matter. But this was a unique opportunity where we had a chance to get our hands on assets that are targeting validated target at a very attractive price. So it was a unique opportunity that we could not pass.

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Joseph W. Turgeon, Spectrum Pharmaceuticals, Inc. - President, CEO & Director [5]

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I think you asked about immuno-oncology. Sure, that's a really interesting area right now. And we're glad to be in it.

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Emma Kathleen Nealon, Cantor Fitzgerald & Co., Research Division - Analyst [6]

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And then just as you think about any potential future acquisitions, like is that something there's still appetite for?

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Joseph W. Turgeon, Spectrum Pharmaceuticals, Inc. - President, CEO & Director [7]

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I didn't hear the end of your question. Could you repeat the end? I'm sorry.

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Emma Kathleen Nealon, Cantor Fitzgerald & Co., Research Division - Analyst [8]

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Sure. Just following this acquisition and looking at your cash balance now, are you still in the market to bring in additional assets beyond what was announced today?

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Kurt A. Gustafson, Spectrum Pharmaceuticals, Inc. - Executive VP & CFO [9]

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Our business model is to acquire new products. So this is consistent with the vision and mission that we have here. So we're always on the look and hope to continue to build this portfolio.

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Operator [10]

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Your next question comes from the line of Ed White from H.C. Wainwright.

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Edward Patrick White, H.C. Wainwright & Co, LLC, Research Division - MD of Equity Research & Senior Healthcare Analyst [11]

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So first of all on ASCO, congratulations. It seems like it's a change from previous years when it didn't seem like ASCO was interested in the treatment of chemotherapy-induced neutropenia patients.

So with all the new therapies on the way, though, obviously, behind ROLONTIS, do you think that there's some more excitement in the medical community now in this area again and from what you're seeing as you prepare for your launch? And then also -- well, I'll come back to another ROLONTIS question after that.

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Joseph W. Turgeon, Spectrum Pharmaceuticals, Inc. - President, CEO & Director [12]

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Yes. I'll start, and Tom can comment, too. I do think that there there's excitement. For years and years and years, and I was a big part of that, as you know, there was only 1 place -- 1-stop shopping, so to speak. And I think that this is changing the game, so to speak, in all these offices for the first time.

And I think what makes us even more unique is in this -- as new products come out, we're the only novel therapeutic that's coming right now since the beginning. The others are biosimilar. So that puts us in a very unique position. So yes, and we're excited about ASCO, too, because in the post, you'll get to see the integration of both trials. And it was good that ASCO accepted that.

So you're right, they did accept the poster, and you get to see the data combined [you 2] trials. And Tom, I'll let you comment also.

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Thomas J. Riga, Spectrum Pharmaceuticals, Inc. - Executive VP, COO & Chief Commercial Officer [13]

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Ed, it's Tom. I think competition always breeds interest, especially in really large markets that are important to oncologists and supportive care has had a lot of attention over the past year, and will continue into the next several.

So we're excited to be a part of it, get this file back to the agency and ultimately achieve approval.

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Edward Patrick White, H.C. Wainwright & Co, LLC, Research Division - MD of Equity Research & Senior Healthcare Analyst [14]

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Okay. And then just on something that Kurt had said about ROLONTIS being delayed and postponing the prelaunch expectations in 2019. Am I reading too much into this? I mean, are you thinking now that the launch isn't going to occur until 2020? Or do you think 2019 is still a possibility?

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Joseph W. Turgeon, Spectrum Pharmaceuticals, Inc. - President, CEO & Director [15]

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Ed, I don't want to comment on the when and till. We've got an upcoming meeting with the agency, which I think we'll be in a better position to see where we're at.

I'll remind you of this: we're working diligently to prepare the CMC module. I'll remind you, they told us exactly what they want. They're working with us, being very helpful. So I look forward to the next meeting. I'm really pleased with the progress we're making on that part of the trial. And I'll remind you, as you well know that the clinical data was sound. It was both -- hit both the primary and secondary endpoints, which is, you could argue, the harder -- the hardest part of this thing. And in the near term, we plan on filing it as soon as it's ready.

And again, after the meeting with the agency, we'll know more about when. So I hope that answers your question.

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Edward Patrick White, H.C. Wainwright & Co, LLC, Research Division - MD of Equity Research & Senior Healthcare Analyst [16]

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Yes. No, it does. And just, again on ASCO, I was just curious if, there was nothing in the announcement, so I expect -- I mean, I'm assuming that there's going to be no abstracts or presentations on pozi at ASCO. But I was just curious if an abstract or -- was submitted by either Spectrum or Dr. Heymach for poziotinib.

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Joseph W. Turgeon, Spectrum Pharmaceuticals, Inc. - President, CEO & Director [17]

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No. Nothing was submitted. I'm not -- you know that our data will be in the fourth quarter from cohort 1.

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Edward Patrick White, H.C. Wainwright & Co, LLC, Research Division - MD of Equity Research & Senior Healthcare Analyst [18]

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Okay. And then just in that vein, too. Last question. Just -- I know you didn't really give a timeline for cohorts 3 or 4, but can you tell us how the progress of enrollment is happening there? Is it within expectations? Or anything you can give us on that, I'd appreciate.

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Francois Lebel, Spectrum Pharmaceuticals, Inc. - Chief Medical Officer [19]

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Yes. Thank you for the question. The -- so yes, we're recruiting -- we're on track for the recruitment of those. We have a number of additional site opening in Europe in the near term.

So we think we're on track, and we think things will potentially even accelerate. And I think even more important is we're guiding you today which clearly that -- even though we said cohort 2 will be Q4 event, that recruitment is particularly going well there. So stay tuned.

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Joseph W. Turgeon, Spectrum Pharmaceuticals, Inc. - President, CEO & Director [20]

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And I'll just add 1 thing. When you look at cohort 1, ahead of schedule, cohort 2 now.

Dr. Francois tells you, ahead of schedule. It certainly demonstrates the unmet need here. There's a need for these patients. No question.

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Edward Patrick White, H.C. Wainwright & Co, LLC, Research Division - MD of Equity Research & Senior Healthcare Analyst [21]

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Okay. Great. And I misspoke before. Actually I wasn't expecting ROLONTIS launch until 2020. I mistakenly said '19, but it seems like it's -- that once -- that you'll give us an update as things become more clear. We -- like after you meet with the FDA or you get some more clarity, will you be conveying that to investors?

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Joseph W. Turgeon, Spectrum Pharmaceuticals, Inc. - President, CEO & Director [22]

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Well, listen, right now, what I'm going to tell you is we got the upcoming meeting. We want to get this filing as soon as it's ready. That's what we're going to do.

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Operator [23]

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Your next question comes from the line of Maury Raycroft from Jefferies.

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Maurice Thomas Raycroft, Jefferies LLC, Research Division - Equity Analyst [24]

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First one is just on poziotinib on cohort 2. So it sounds like the enrollment for that is going pretty well. Are you at a point where you think the data may come earlier than expected then?

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Francois Lebel, Spectrum Pharmaceuticals, Inc. - Chief Medical Officer [25]

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No. We've not changed the guidance officially. It's still Q4 for full enrollment.

But we're just telling you that things are moving along very nicely. We have not changed anything in terms of the data. We would have to follow patient following the last patient in to make sure that we have not only response but durable response. So there's no change on that front.

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Joseph W. Turgeon, Spectrum Pharmaceuticals, Inc. - President, CEO & Director [26]

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Maury, the other thing I will remind you is that each of the 4 cohorts are powered individually and stand alone. So I'll remind you of that.

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Maurice Thomas Raycroft, Jefferies LLC, Research Division - Equity Analyst [27]

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Got it. And then the CD20 interferon acquisition is pretty interesting. And so that Phase I trial that's enrolling right now, can you give a status update on that? And how many patients are in? And are you at a therapeutically active dose?

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Francois Lebel, Spectrum Pharmaceuticals, Inc. - Chief Medical Officer [28]

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Yes. So this was a 3 by 3 dose-escalation study, and if you go to clintrials.gov (sic) [clinicaltrials.gov], you obviously will see the other parameters. There was a number of cohorts, and we have not -- we're not going to announce anything right now in terms of how many cohorts, obviously. You're looking for maximum tolerated dose, so we'll do as many cohorts we need.

The only thing I can say right now is that there is progress -- there is good progress in terms of the number of cohorts that have been dosed. And -- but there's few more. And safety profile is very much in line with what is expected, meaning very likely to be much better than traditional interferon.

But we're not going to give today any resolve as to number of patients or any more detail. Obviously, we will present eventually on an appropriate scientific forum the results.

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Maurice Thomas Raycroft, Jefferies LLC, Research Division - Equity Analyst [29]

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Got it. Okay. And then just -- and asking about the molecule, some more details around that. I'm wondering if you could say anything about the CD20 IgG format or even epitope that it's targeting, if there's something unique about that, that you can comment on.

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Francois Lebel, Spectrum Pharmaceuticals, Inc. - Chief Medical Officer [30]

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So we believe that we have a proprietary technology through the license that we got from UCLA.

And I don't think we have disclosed or are planning to disclose any detail as to which epitopes or what modification were done on the antibody fragment or on the interferon [molecule] either.

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Maurice Thomas Raycroft, Jefferies LLC, Research Division - Equity Analyst [31]

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Okay. Okay. And then also in the update was a line in there about the FIT antibody delivery platform. And I'm just wondering if you could talk more about what that is exactly.

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Francois Lebel, Spectrum Pharmaceuticals, Inc. - Chief Medical Officer [32]

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Well, it's a very attractive or flexible platform. It -- as I mentioned in my comments there, you have to possibly deliver double hits here.

You get the -- potentially the activity of the interferon that leads to interferon-induced gene expression signature. And so you get that benefit. And as you know the -- in the past, the problem with interferon has not been the lack of activity as an antitumor molecule, it was the toxicity, the systemic toxicity.

And let's just say that the preclinical data as well as, so far, the clinical data, is very encouraging that there might be truly a way here to get the benefit of interferon without necessarily the toxicity. So that's very encouraging. And that's only 1 aspect of it. You want the interferon to be delivered to the tumor microenvironment. And that's where the other part of the molecule, which is targeting tumor antigen, brings a higher quantity of the interferon right to the site of needed action, if you want. So you get a double whammy, if you want. You get the interferon benefit, minimal activity in the systemic circulation and concentrated activity at the site -- in the tumor microenvironment where you need it.

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Maurice Thomas Raycroft, Jefferies LLC, Research Division - Equity Analyst [33]

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Yes. Cool. It's pretty interesting. And so basically you're using much less interferon, and you're getting the interferon into the tumor microenvironment.

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Francois Lebel, Spectrum Pharmaceuticals, Inc. - Chief Medical Officer [34]

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Absolutely plus possibly -- you remember that the antibody, though, can be -- in the current one we're targeting CD20, it's -- the following one is GRP94. But what we've been [licensed] here is the access to other possible target here. And also as you probably well know, interferons come in various flavor or subtypes. Alpha interferon, for example, has in excess of 23 subtypes. So we have a lot of flexibility with this platform.

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Operator [35]

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I am showing no further questions at this time. I would now like to turn the conference back to Joe Turgeon.

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Joseph W. Turgeon, Spectrum Pharmaceuticals, Inc. - President, CEO & Director [36]

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I appreciate everybody's interest. Thank you for joining the call. And I look forward to talking to you in the future. Thank you very much, Operator.

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Operator [37]

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Ladies and Gentlemen, this concludes today's conference. Thank you for your participation, and have a wonderful day. You may all disconnect.