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

Q2 2019 Spectrum Pharmaceuticals Inc Earnings Call

IRVINE Sep 2, 2019 (Thomson StreetEvents) -- Edited Transcript of Spectrum Pharmaceuticals Inc earnings conference call or presentation Thursday, August 8, 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

* Harshita Polishetty

B. Riley FBR, Inc., Research Division - Analyst

* Maurice Thomas Raycroft

Jefferies LLC, Research Division - Equity Analyst

* Yue-Wen Zhu

Guggenheim Securities, LLC, Research Division - Associate

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Presentation

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Operator [1]

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Good day, ladies and gentlemen, and welcome to the Spectrum Pharmaceuticals Second Quarter 2019 Earnings Conference Call. (Operator Instructions) 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.

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

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Thanks. Good afternoon to everyone. Thank you for joining us today for Spectrum's Second 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 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 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.

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

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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 fourth quarter of this year. Results from 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 preclinical data, we expanded our mutation strategy beyond exon 20 and into the treatment of osimertinib failures and atypical mutations. There is 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 and entering these new areas and exploring further the role of pozi 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 plan to submit the BLA in the fourth quarter. I want to remind you that we have very strong efficacy and safety data coming out of 2 large Phase III trials. If approved, this product would compete in a multibillion-dollar market that I and many members of our management team have a deep expertise in. We look forward to successful submission and its ultimate approval.

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

Overall, Spectrum is in a great position. We're on the cutting-edge of science. We are 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 second half of the year.

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

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

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Thanks, Joe. I'll begin with some comments on continuing operations. Our SG&A expense for the second quarter of 2019 was $17.2 million, and R&D expense was $17 million. R&D expense included a onetime charge for the licensing of ImmunGene's FIT technology of $2.8 million.

Our net loss from continuing operations was $28.8 million. However, on a non-GAAP basis, which primarily backs out stock compensation costs as well as the licensing fee paid to ImmunGene, our loss was $25.2 million.

The income from discontinued operations was $388,000 and represents various items recorded in the second quarter that are related to the commercial business that was sold to Acrotech on March 1.

As we look towards the second 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 CASI.

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 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 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 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 physician are in need of effective treatment options.

As Joe mentioned, we expect the top line results from cohort 1 in the fourth quarter. This cohort is evaluating patients with previously treated EGFR exon 20 insertion mutations. Cohort 2, which is evaluating pozi in previously treated HER2 patients, reached full enrollment in Q2. This was an exciting milestone, as it happened 6 months ahead of schedule and speak 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 HER2 patients with exon 20 insertion mutation. We recently announced 3 additional cohorts in the ZENITH20 trial that are actively recruiting patients.

Cohort 5 includes previously treated or treatment naïve, non-small cell lung cancer patients with EGFR or HER2 exon 20 insertion mutation. We opened this cohort 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 patient, whose tumor progressed while on treatment with first-line osimertinib and developed new EGFR mutations. Recent preclinical data suggests that poziotinib may be active against many of these EGFR-dependent resistant mechanisms.

Cohort 7 includes non-small cell lung cancer patient with a variety of less common mutation in EGFR and HER2, exons 18 to 21 or the extra cellular 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. A. Max Greou] 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 III ROLONTIS clinical trials, which included a total of 643 patients. The integrated analysis of efficacy and safety was consistent which results from the individual studies, demonstrating that ROLONTIS was non-inferior to pegfilgrastim in the reduction of duration of severe neutropenia.

Regarding our BLA filing, we recently had a productive meeting with the FDA to further discuss their expectation around module 3, which is the module focused on manufacturing. Based on the outcome of that meeting, we expect to submit the BLA in the fourth 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 immuno-oncology space, an area that I know well. The FIT platform creates a new class of biotherapeutics engineered by fusing interferon alpha with a monoclonal antibody targeting a specific and validated tumor antigen.

Interferons are very potent cytokines that are well-established as cancer therapeutics but have historically been associated with significant systemic side effect.

Preclinical 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 has been executing on our goals and energized about our path forward.

Now I'll 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.

We made a lot of progress in the second quarter. We have a growing oncology pipeline with important near-term milestones for both poziotinib and ROLONTIS. And we have a promising novel immuno-oncology platform. We look forward to major catalysts in the coming months.

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

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

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This is Emma on for Alethia. For the new expansion cohort 5, could you just walk us through the dosing regimen and whether there are any differences between the cohorts 1 and 2?

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

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

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

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So the main -- cohorts 1 and 2, or 5?

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

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In 5.

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Kurt A. Gustafson, Spectrum Pharmaceuticals, Inc. - Executive VP & CFO [6]

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In 5. Yes.

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

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So cohort 5 -- the primary reason why we have cohort 5 is, as I've indicated, we have received numerous requests for compassionate use from investigators that have 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 have 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 market, the more data you have, the better it is.

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

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But I guess, specifically on the dosing, is the dosing regimen the same as cohorts 1 and 2?

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

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Sorry. Sorry. So the dosing regimen, we're exploring 3-dose level. We're going to be randomizing patient to 10-milligram, 12-milligram and 16-milligram per day. And we are allowing patients that would be started on lower dose to potentially escalate, if ever there would be signs of progression.

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Operator [10]

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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 [11]

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Congrats on the progress. So my first question is on ROLONTIS. Just wondering if you can comment on any gating factors remaining prior to submitting the BLA.

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

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Yes. Hi, Maury. This is Joe. Listen -- good to hear from you. Listen, we are aligned with the FDA. We had our meeting. We got aligned. We're being thorough. We're being deliberate. And we went with our filing in the fourth quarter as we said. This was -- the questions that we had to answer were in module 3, which is in the CMC section only. And again, we're being, like I said, thorough and deliberate and plan on filing this in the fourth quarter.

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Maurice Thomas Raycroft, Jefferies LLC, Research Division - Equity Analyst [13]

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

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Francois Lebel, Spectrum Pharmaceuticals, Inc. - Chief Medical Officer [14]

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Yes. Good question. So we have not fully powered those studies. These -- 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 translate clinically. If it does, obviously, we would potentially modify those cohorts. There will be additional studies. But we need to first confirm whether -- for now, we can see the same signal in patients.

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Operator [15]

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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 [16]

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So 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?

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Francois Lebel, Spectrum Pharmaceuticals, Inc. - Chief Medical Officer [17]

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Sure, Ed. So the answer is -- the short answer is no, we don't think it's going to delay us at all. If anything, this is -- will be helpful. So remember, cohorts 1 to 4 actually, 1, 2, 3, 4 -- our cohorts 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. If you know, in any kind of way, they're independent of the pivotal trials that were cohort 1 to 4. So this would be simply additional data that would provide additional safety information, et cetera. It's not part of request to the FDA. We're doing this on our own.

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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. Great. And now a question post the TAK-788 data at ASCO, 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 was higher than poziotinib.

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Thomas J. Riga, Spectrum Pharmaceuticals, Inc. - Executive VP, COO & Chief Commercial Officer [19]

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Hey, Ed, it's Tom. We've, obviously, looked at that data in detail. I think it's pretty early. It looks like that study is starting. I think our position, we feel really strong about with the data readout in Q4 and is well ahead in the development life cycle with poziotinib. So we'll have to see what that market looks like. I think what it really says is that there is real unmet need for this patient population. As more and more compounds come into the full, I think it speaks to the solutions that patients need, and we're pleased to be at the forefront of that.

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Edward Patrick White, H.C. Wainwright & Co, LLC, Research Division - MD of Equity Research & Senior Healthcare Analyst [20]

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

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

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Right. I think the only -- unfortunately, the only information I can give you is that we absolutely intend to have a basket study in the second half 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. Obviously, we'll give you more information when things are finalized.

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Operator [22]

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And our next question comes from Michael Schmidt with Guggenheim Securities.

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Yue-Wen Zhu, Guggenheim Securities, LLC, Research Division - Associate [23]

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This is Charles Zhu on for Michael Schmidt. Congrats on all the progress. First, on your -- first, on ZENITH20, how would you characterize the enrollment time line of cohorts 3 and 4? And can we expect similar time lines 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 in lung cancer evaluating TKIs, even as we get to the more frontline setting, we're still seeing a lot of patients who come off of platinum-based chemotherapy.

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

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Right. So yes -- I can't give you a large amount of details there other than to say it's recruiting nicely according to our expectation. I agree with you that we're aware that first-line studies like that might be slightly more difficult to recruit. But so far, it's not been an issue. And we're progressing well as expected. So unfortunately, I can't really tell you much more than that. So in terms of -- did you request time line or? Yes?

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Yue-Wen Zhu, Guggenheim Securities, LLC, Research Division - Associate [25]

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Yes.

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

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Yes. Charles, the only thing that 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.

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Yue-Wen Zhu, Guggenheim Securities, LLC, Research Division - Associate [27]

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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 pozi access for patients that would normally have 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 like a patient that would have gone on 3 might go on 5 now instead? And would that have any like potential delay for 3 and 4? Or would you be able to supplement like in a data set from 3 and 4 with like a partial data set from 5?

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

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

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Yue-Wen Zhu, Guggenheim Securities, LLC, Research Division - Associate [29]

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Got it. That makes sense. And then last question from me regarding ROLONTIS. Just as a general question, how do you see the dynamics or the market size shifting for G-CSF, as Neulasta biosimilars continue their uptake?

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Joseph W. Turgeon, Spectrum Pharmaceuticals, Inc. - President, CEO & Director [30]

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Yes. I'm going to let Tom give you some color around 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 to us or anything new, I'll tell you that. But Tom, why don't you speak to the market?

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Thomas J. Riga, Spectrum Pharmaceuticals, Inc. - Executive VP, COO & Chief Commercial Officer [31]

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Yes, Charles, we're seeing rational pricing in the marketplace that'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 having a novel solution entering the marketplace with the backgrounds of our leadership team will be able to compete in that market. We're looking forward to getting this filing here in the fourth quarter and having the opportunity to enter that ring.

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Operator [32]

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And our next question comes from Harshita Polishetty with B. Riley FBR.

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Harshita Polishetty, B. Riley FBR, Inc., Research Division - Analyst [33]

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Congrats on the progress. I guess, I wanted to ask about pozi and other tumor types. I guess, Ed already touched this with regards 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 are thinking about potential combinations?

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

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Yes, you're correct, we plan to do -- start a combo study in the second 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, that where you would expect that to have either preclinical data supporting the combination, or that you have reason to believe that mechanistically, those 2 drugs would work well together. The other things that you always have to look for in combining drug, you want, 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.

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Operator [35]

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I'm 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.

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

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

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Operator [37]

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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.