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Edited Transcript of SPPI earnings conference call or presentation 7-Nov-19 9:30pm GMT

Q3 2019 Spectrum Pharmaceuticals Inc Earnings Call

IRVINE Nov 17, 2019 (Thomson StreetEvents) -- Edited Transcript of Spectrum Pharmaceuticals Inc earnings conference call or presentation Thursday, November 7, 2019 at 9:30:00pm 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, Principal Accounting Officer & 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

* Maurice Thomas Raycroft

Jefferies LLC, Research Division - Equity Analyst

* Michael Werner Schmidt

Guggenheim Securities, LLC, Research Division - Senior Analyst & Senior MD

* Varun Kumar

Cantor Fitzgerald & Co., Research Division

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Presentation

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Operator [1]

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Ladies and gentlemen, thank you for standing by, and welcome to the Spectrum Pharmaceuticals Third Quarter 2019 Earnings Call. (Operator Instructions)

Please be advised that today's conference is being recorded. (Operator Instructions)

I would now like to hand the conference over to your speaker, Shiv Kapoor, Vice President, Strategic Planning and Investor Relations. Please go ahead.

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

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Thank you. Good afternoon to everyone.

Thank you for joining us today for Spectrum Pharmaceutical's Third 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 about 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 our -- in today's press release. This notice emphasizes the major uncertainties and risks 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 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 expressed or implied by such forward-looking statements.

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 good afternoon. Welcome to everybody on the call. I appreciate your interest in Spectrum, and we remain highly focused on our late-stage assets, poziotinib and ROLONTIS. So let me begin with updates on our progress.

The poziotinib program, which targets hard-to-treat mutations in lung cancer, is in full swing. We have a broad development program to explore its full potential and are pleased with enrollment. We're expecting results from the first cohort of the ZENITH20 trial in December. Dr. Francois will give you a comprehensive update of our expanded pozi program in just a few minutes.

ROLONTIS is our late-stage drug being developed for the treatment of chemotherapy-induced neutropenia. As you recall, we voluntarily withdrew our BLA application earlier this year. Since then, we worked closely with the FDA and recently submitted a robust package. We look forward to competing in this market.

Let me talk about the direction I'm moving this company. Our focus is crystal clear. We're developing 2 late-stage assets and expanding the pipeline. We've made significant progress and have shifted from small niche products to higher-value targets through divestiture of our legacy assets, advances in our late-stage products and the acquisition of the FIT platform.

We've focused on our strategic priorities, and we are aggressively pursuing opportunities to expand our pipeline. With a growing pipeline, significant near-term milestones, solid capitalization and a highly focused team, we're in a strong position to drive these programs forward.

With that, let me turn it over to Kurt to go over the financials.

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

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Thanks, Joe. Let's start with continuing operations. Our SG&A expense for the third quarter of 2019 was $13.1 million versus $17.2 million in the previous quarter. R&D expense was $17.2 million versus $17 million in the previous quarter, and our net loss from continuing operations was $26.6 million versus $28.8 million in the prior quarter.

On a non-GAAP basis, which primarily backs out stock compensation costs, our loss for the quarter was $24.5 million. This quarter income from discontinued operations was $572,000, relates to the commercial business that was sold to Acrotech. As we look ahead, we continue to expect R&D expenses to increase as we expand clinical development and manufacturing for poziotinib and ROLONTIS.

We ended the quarter with $252 million in cash, plus marketable securities, giving us plenty of runway 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 progress.

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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. Our primary focus remains investigating pozi for 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 critical need of effective treatment options.

ZENITH20 is a comprehensive multicohort study evaluating a broad range of lung cancer patients with specific mutations. Cohorts 1 to 4 are each independently powered with prespecified statistical hypothesis, where the primary endpoint is objective response rates. The top line results from cohort 1, evaluating pozi in previously treated EGFR patients with exon 20 insertion mutation, are expected in December. Let me remind you, we have a world-class group of clinician-scientists, who are on our Independent Review Committee, who will rule on whether we met the primary endpoint of ORR based on the protocol. We expect to share this information with you in December. Cohort 2, which is evaluating pozi in previously treated HER2 patients, reached full enrollment in Q2, 6 months ahead of schedule.

We are pleased with the enrollment for cohort 3 and 4, which are evaluating first-line patients. Based on promising preclinical data presented recently at World Lung Conference in Barcelona, 3 new cohorts, cohorts 5, 6 and 7, were added to the study and are actively enrolling patients. Cohort 5 includes previously treated and treatment-naive non-small cell lung cancer patients with EGFR and HER2 exon 20 insertion mutation. Cohort 6 include lung cancer patients who are osimertinib resistant. Cohort 7 includes lung cancer patients with a variety of atypical mutations.

In addition, we are collaborating with MD Anderson Cancer Center on an investigator-led basket study that will be evaluating pozi in various mutated solid tumors. This study has already enrolled its first patient. We are excited about these developments, especially when they will start to mature in the near future.

Now shifting to ROLONTIS. ROLONTIS is a novel long-acting G-CSF seeking an indication for the treatment of neutropenia in patients receiving myelosuppressive cancer therapy.

On October 24, we submitted an expanded BLA to the FDA. The withdrawal 7 months ago was driven by Module 3 or the CMC section. Since then, we've had productive dialogue with the FDA. We implemented their guidance, provided additional data and rewrote and reorganized certain sections of the file, resulting in a strong submission. As a reminder, our BLA is based on robust clinical data from 2 large pivotal, independent, randomized controlled trials. In both studies, ROLONTIS met the prespecified endpoint of noninferiority in duration of severe neutropenia and met all secondary endpoints. The safety profile was similar to pegfilgrastim.

Last week at the ASCO Supportive Care in Oncology Symposium in San Francisco, we presented data from both pivotal Phase III trials, which included a total of 643 patients. The analysis provided integrated efficacy and safety data to clinicians that were consistent with result from the individual studies.

To summarize, we have an exciting late-stage oncology pipeline with important near-term milestone on pozi and ROLONTIS.

Now let me 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, and thank you, Kurt. Listen, I'd like to open it up for questions now, operator, if you can you do that?

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Questions and Answers

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Operator [1]

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(Operator Instructions) Our first question comes from Alethia Young with Cantor Fitzgerald.

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Varun Kumar, Cantor Fitzgerald & Co., Research Division [2]

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It is Varun Kumar for Alethia Young. First, on cohort 1. When you think about durability, do you get a sense from regulatory agency that they're looking for a certain minimum duration? And are you confident that response rate is not -- is the only hurdle that you'll get for approval?

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

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Let me answer the first part. I want you to repeat the second. I didn't hear the second part, but let me answer the first part. First, thanks for the question. When it comes to duration, when you have an agreement with the agency, you don't get a specific number. In other words, you don't get a hard number that says you have to be x amount of duration. What it is, is a -- clinically meaningful is what they give you for the exact wording. So what we have to -- that's negotiable depending on the unmet need, et cetera. And so the word that we'll have to negotiate with the agency at the end is it clinically meaningful or not. And what was the second part of your question?

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Varun Kumar, Cantor Fitzgerald & Co., Research Division [4]

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Ah, yes, it was on the response rate. So looks like the response rates are generally the criteria, but it requires supporting durability along with it, right? If I understand correctly.

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

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Yes. Obviously, there are 3 things that any drug is going to be looked at, right? First of all, it's your primary endpoint. That happens to be overall response rate in this particular trial. Second would be, as you said, duration PFS. Then the third thing they look at is the safety profile of the drug. So that would be the 3 things that they would look at.

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Varun Kumar, Cantor Fitzgerald & Co., Research Division [6]

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And maybe a second question on -- if you can remind us the frequency of scans in the study and how does it compare to MD Anderson study previously done.

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Francois Lebel, Spectrum Pharmaceuticals, Inc. - Chief Medical Officer [7]

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Sure. So the frequency in the MD Anderson study was every 8 weeks. We've introduced in this trial a first scan at 4 weeks. And then the second scan is at 8 weeks. And thereafter, it's all 8 weeks. So that should help us in detecting early response and being able to document them accurately.

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Varun Kumar, Cantor Fitzgerald & Co., Research Division [8]

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And maybe just the last one. Once we have the data in December from cohort 1, how does that affect your confidence for the next cohort 2, which is HER2, and I think the data is expected mid next year?

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Francois Lebel, Spectrum Pharmaceuticals, Inc. - Chief Medical Officer [9]

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Yes. So the -- you have to remember the first 4 cohort are independently -- they're all independent of one another. So they have different sets of assumption for statistical test of hypothesis. And so they're -- winning in one may not influence the other cohort, and -- or losing in one would also be independent of the other cohorts.

I think the other thing I would add there is cohort 1 and 2 is pretreated patient or previously treated. But you've got to remember that cohort 3 and 4 is significantly different patient population, which is first line. And obviously, that's recruiting well. We're continuing to be very optimistic about that.

And also I'd like to remind you that the FDA allowed us to start the treatment-naive patient here. And that's -- we interpret that as a good sign that they don't want to wait necessarily to -- as a final answer on cohort 1 and 2. So we're really optimistic about all of them and can't wait to turn the card, if you want, in December.

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Operator [10]

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And our next question comes from Ed White with 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 maybe we could just start with the basket study for pozi. I know it just started. I'm just wondering if you have any idea what the first indication will be when you're looking at the preclinical and clinical data that you have on pozi now. I know you're running the basket to see where it's going to be -- where you think it'd be most effective. But I'm just wondering if you have any idea right now what indications would be first in your mind.

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Francois Lebel, Spectrum Pharmaceuticals, Inc. - Chief Medical Officer [12]

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Right. I think we will provide you additional indication or additional information at a later date. I think we just wanted to say today that, in collaboration with MD Anderson, a basket study has opened, not only opened, but enrolled its first patient. And you know it's not posted yet on clinicaltrials.gov. We anticipate that will occur very soon, but I feel that's done. I don't kind of want to say any more than that.

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Edward Patrick White, H.C. Wainwright & Co, LLC, Research Division - MD of Equity Research & Senior Healthcare Analyst [13]

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Okay. Fair enough, Francois. And then as I always do, I typically ask about any changes in the ROLONTIS setting. And since last time we spoke, there has been another biosimilar approved. Has anything been changing in the market? Or is it progressing as expected? And you still -- and just want to get your thoughts on that.

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Thomas J. Riga, Spectrum Pharmaceuticals, Inc. - Executive VP, COO & Chief Commercial Officer [14]

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Ed, it's Tom Riga. You saw the news, the next biosimilar has entered the market. We're monitoring that closely. I think that market is a dynamic one as you have another entrant of biosimilars into it, but we remain confident. As we have consistently said of having a BLA file, which is not through the 351(k) pathway, is a novel asset, provides us some unique opportunities as it relate to controlling our own destiny as to the levels of access and reimbursement, life cycle management of the asset. And we're thrilled to have submitted the BLA in October and anxiously await that action date so that we can ultimately get this product approved by the agency and be able to enter that market.

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Edward Patrick White, H.C. Wainwright & Co, LLC, Research Division - MD of Equity Research & Senior Healthcare Analyst [15]

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Great. And maybe coming back just on pozi and the competitor TK-788. We've seen a lot of data from both now, and just want to think about your thoughts on how far ahead you think you're going to be at launch and how you're going to position -- based on the data we know now, how you're thinking of positioning the drug to take maximum share -- or to maintain maximum share actually, since you're in the lead.

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Joseph W. Turgeon, Spectrum Pharmaceuticals, Inc. - President, CEO & Director [16]

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Yes. I'll start, and Dr. Francois can talk about data also if you want to. But let me tell you this, Ed, as far as positioning, I'm excited that we're turning over our card. We're not just starting our trials. We've got 2 fully enrolled registrational trials with data, which we just said, in December, we'll be flipping that card. So the first thing, I'll say, positioning, first-to-market means a lot. Been through a lot of launches and first-to-market gives you a great advantage here. So I'm -- we're looking forward to that. If the data are good, we would meet with the agency and hopefully file.

I can't speak -- I can only speak to ours. I'll monitor the other products (inaudible). I can tell you this, I'm not surprised that you see other potential products looking at the market. This shows the unmet need. It is truly an unmet need here. It's a large group of patients that need help, as we said. Like you asked about the basket, we may be even expanding there. So the bottom line is we'll monitor any and all other potential products. I can tell you that we have 2 fully enrolled cohorts, and we're really happy with the 3 and 4 that are enrolling and actually following the science with 3 more cohorts. So we're well on -- we're well ahead here. I can't give an exact date on anything other than I'm pleased with the position we're in.

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Operator [17]

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And our next question comes from Maury Raycroft with Jefferies.

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Maurice Thomas Raycroft, Jefferies LLC, Research Division - Equity Analyst [18]

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Congrats on the progress. Thanks for the clarity on having the data in December. Just wondering if you can say if the database is locked. And any more granularity on whether it would be earlier or later in December?

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

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So we're not giving you an exact date, neither can I answer whether or not the database is locked. Remember this is the data -- the central imaging lab is in the process of analyzing some of the data and is being sent -- when the analysis is complete, it's going to be sent to an independent data review committee who will, in turn, after examining, conducting the analysis, potentially asking a number of questions, then would disclose to us whether or not we've met the primary endpoint.

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Maurice Thomas Raycroft, Jefferies LLC, Research Division - Equity Analyst [20]

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Got it. Okay. And as far as for that review board, I was just wondering if you could provide any more specifics on how many people are involved in the independent review board. And what kind of questions could -- are they going to -- what are they going to be looking at to come up with a unified decision? And what kind of questions could come out of that?

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Francois Lebel, Spectrum Pharmaceuticals, Inc. - Chief Medical Officer [21]

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Yes. So the analysis are prespecified in the protocol, and there is a statistical analysis plan that gives a lot more details. So we're not going to disclose that, but this is all laid out on paper, if you want, as guidance to the IDRC, which is the independent board. And they have the ability to request to review some of the scans if they want, and that's supported. We absolutely want to be forthcoming, if there's any question, that the central imaging lab would provide them access to whatever they want to arrive at their final decision and final recommendation to us.

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

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And Maury, I'll just add. You asked who. I'll just tell you they're renowned oncologists who deal with non-small cell lung cancer, know it inside out. So they're the right people to evaluate the outcome.

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Maurice Thomas Raycroft, Jefferies LLC, Research Division - Equity Analyst [23]

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Got it. Okay. And then -- so they make a decision, they give you guys a general answer to that decision? Or are they going to give you overall response rate and additional data? And then what could we end up expecting? What could end up in the press release that you guys put out? What kind of specifics should we expect in there, I guess?

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Francois Lebel, Spectrum Pharmaceuticals, Inc. - Chief Medical Officer [24]

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Yes. So their main task is, again, to -- there are detailed guidance. But their main -- the fundamental decision or recommendation they make is -- relates to whether or not the overall response rate met the prespecified endpoint, lower bound, et cetera, that was stipulated in the protocol. That's their task. That's what they will do. And so we look forward to receiving that. And I can't remember if there was another angle to your question there.

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Joseph W. Turgeon, Spectrum Pharmaceuticals, Inc. - President, CEO & Director [25]

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Well, you asked what the press release would say, I think you said, Maury. Obviously, you're going to know did we hit the primary endpoint or not, the ORR, you'll know that. You'll know some -- there'll be some comment on duration and safety. So I think you'll have not all the information from the study because we want to present that at a meeting, but I think you'll have the primary endpoint, did we hit it or not, some comment on duration PFS and there's some comment on safety also. I think that's safe to say.

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Maurice Thomas Raycroft, Jefferies LLC, Research Division - Equity Analyst [26]

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Perfect. Okay. And then last question is just on ROLONTIS. Are you going to do a press release when the BLA is accepted for ROLONTIS? And then any comments on whatever issues were addressed to give you guys confidence to resubmit?

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Joseph W. Turgeon, Spectrum Pharmaceuticals, Inc. - President, CEO & Director [27]

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Well, I'll start. We will certainly let you know when we have a PDUFA date. I think that's safe to say. And the second part was -- what was the second part of your question, I'm sorry?

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Maurice Thomas Raycroft, Jefferies LLC, Research Division - Equity Analyst [28]

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Just if you're providing any more clarity on the manufacturing issues that were addressed to give you guys confidence to refile again.

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Thomas J. Riga, Spectrum Pharmaceuticals, Inc. - Executive VP, COO & Chief Commercial Officer [29]

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Maury, it's Tom Riga. We had not provided more details than what was in the prepared remarks. We worked closely with the agency. We implemented their guidance. We feel that we've learned from their feedback and put together a strong package and look forward to that action date.

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Maurice Thomas Raycroft, Jefferies LLC, Research Division - Equity Analyst [30]

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Fair enough. Okay. Okay. Well, congrats again.

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Operator [31]

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And our next question comes from Michael Schmidt with Guggenheim.

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Michael Werner Schmidt, Guggenheim Securities, LLC, Research Division - Senior Analyst & Senior MD [32]

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Maybe just a follow-up on cohort 1 on the ZENITH study. Just operationally, I suppose, I guess what triggers the analysis? Is it a certain prespecified follow-up period? Or is it another trigger that would trigger the actual analysis?

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Francois Lebel, Spectrum Pharmaceuticals, Inc. - Chief Medical Officer [33]

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Yes. The cutoff date for analysis was triggered by having a minimum 6 months follow-up on the last patient that was entered in the study.

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Michael Werner Schmidt, Guggenheim Securities, LLC, Research Division - Senior Analyst & Senior MD [34]

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Understood. Okay. And is that follow-up the same for the exon 20 HER2 population? Or is it different for that stuff -- for that cohort?

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Francois Lebel, Spectrum Pharmaceuticals, Inc. - Chief Medical Officer [35]

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So it is -- cohort 2, we have not provided any indication other than say that we would have a top line data release midyear in 2020.

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Michael Werner Schmidt, Guggenheim Securities, LLC, Research Division - Senior Analyst & Senior MD [36]

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Okay. And then a question regarding front-line patient population. I know the cohort 3 and 4 are still enrolling. But I guess assuming -- or should you meet the primary endpoint or the endpoint in cohort 1, I suppose, how do you think about accessing the first-line market longer term? I guess what type of trial designs might be adequate to get to front-line exon 20 patients?

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Francois Lebel, Spectrum Pharmaceuticals, Inc. - Chief Medical Officer [37]

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Yes. I think that's an excellent question. Obviously, we're going to seek guidance here. It's going to depend obviously on the results that we're going to get in cohort 1, and we are -- we'll very much engage the FDA to try to understand what their expectation is and if it's changed from original. But obviously, if it's a highly positive result, then we would have to discuss with the FDA if, for ethical reason, we need to have a look at the data sooner. But right now, we can't. We'll have to see the data first.

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Michael Werner Schmidt, Guggenheim Securities, LLC, Research Division - Senior Analyst & Senior MD [38]

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That's great. And then just maybe regarding ROLONTIS. It's probably fair to assume a standard review. Is that correct? And then my follow-up would be, how do you think about -- I guess, what size -- to what degree do you need to build a commercial infrastructure, I guess? How would you size that to commercialize the drug in the U.S.?

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Joseph W. Turgeon, Spectrum Pharmaceuticals, Inc. - President, CEO & Director [39]

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Yes. It's a standard review, Michael. That 10-month review, I think that's what to expect. Tom, why don't you mention on the sales force buildup?

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Thomas J. Riga, Spectrum Pharmaceuticals, Inc. - Executive VP, COO & Chief Commercial Officer [40]

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Yes. So Michael, the submission was the 24th, standard review. You could back into, call it, Q4-ish 2020 timeline. Typically, a commercial buildup, 6 months, some are a bit sooner than that when you start building out that infrastructure. We have always prided ourselves on being a lean operation when it comes to FTEs, and we will look to build an adequate yet resourceful and scrappy commercial function. But we would look to start that about 6 months prior.

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Joseph W. Turgeon, Spectrum Pharmaceuticals, Inc. - President, CEO & Director [41]

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Michael, I mentioned this to you in past, I'll remind you that when we sold our [inline] products, the sales force went with it. We did hold back some key leadership that are experienced with both this marketplace and also in putting together sales teams, et cetera. So we do have a jump-start on that already by having people here who know how to do that.

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Operator [42]

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And we have a follow-up question from Ed White with H.C. Wainwright.

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Edward Patrick White, H.C. Wainwright & Co, LLC, Research Division - MD of Equity Research & Senior Healthcare Analyst [43]

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There was no comments in the prepared remarks on the Focused Interferon Therapeutics platform. I was just wondering if you can give us a brief update there.

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Francois Lebel, Spectrum Pharmaceuticals, Inc. - Chief Medical Officer [44]

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Sure, Ed. So as you know, we analyzed this asset and there was a Phase I dose-escalation study that had been underway. So we have been working very closely with investigators to restart that study and examine in great detail all the work that had been done so far, preclinical, clinical, as well as consider whether or not the protocol needs to be amended, et cetera.

So there is active interaction with the -- with UCLA at this point, mainly who have the licensing -- that we licensed it from, I believe, including University of Pittsburgh before. So we're actively working with them on that first asset. You got to remember, there are potentially more than one asset that could be derived out of this platform. We know that they had -- were interested in heat-shock protein preclinically. And there are also -- I refer to it as the UCLA freezer, where there are a number of drug candidate that are there, and we've been strengthening our team to develop algorithm to go through these assets so that we pick the right ones to file an IND with and create additional preclinical data. So a lot more to come in the future. And -- so there's just a lot of activity and it's an early asset, so we obviously wanted to focus on our late-stage asset in terms of update.

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Operator [45]

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And I'm not showing any further questions. At this time, I will now turn the call back to Joe Turgeon for any further remarks.

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Joseph W. Turgeon, Spectrum Pharmaceuticals, Inc. - President, CEO & Director [46]

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Yes. Thank you, operator. And again, thank you to everybody. I'm really pleased with our crystal-clear focus, our progress and exciting times. I'm looking forward to turning the card over in December and we're going to see the early pozi data, the data from cohort 1 and also that -- looking forward to that PDUFA date. So thank you for your interest, and we'll talk to you all soon.

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Operator [47]

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Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.