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Edited Transcript of SPPI earnings conference call or presentation 27-Feb-20 9:30pm GMT

Q4 2019 Spectrum Pharmaceuticals Inc Earnings Call

IRVINE Mar 19, 2020 (Thomson StreetEvents) -- Edited Transcript of Spectrum Pharmaceuticals Inc earnings conference call or presentation Thursday, February 27, 2020 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

* Farzin Haque;Jefferies;Senior Associate, Equity Research

* Li Wang Watsek

Cantor Fitzgerald & Co., Research Division - Research Analyst

* Sahil Kazmi;B. Riley;Associate

* Yue-Wen Zhu

Guggenheim Securities, LLC, Research Division - Associate

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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 4Q 2019 Earnings Conference Call. (Operator Instructions)

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

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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 Pharmaceuticals Fourth Quarter and Full Year 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 programs 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 make 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 Turgeon, CEO of Spectrum.

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

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Thank you, Shiv. Good afternoon, and thank you for joining us today. I appreciate everybody's interest in Spectrum. We remain highly focused on our late-stage assets, ROLONTIS and poziotinib. So let me begin with the updates on these programs.

ROLONTIS is our late-stage drug being developed for the treatment of chemotherapy-induced neutropenia. We submitted our BLA in October of 2019, and it was accepted for filing with a PDUFA date of October 24, 2020. If approved, ROLONTIS could be the first novel granulocyte colony-stimulating factor available to health care providers in over 15 years. We have confidence in the future of ROLONTIS and are looking forward to, potentially, competing in this multibillion-dollar market. Our launch preparations for ROLONTIS are actively underway. As the PDUFA date approaches, we'll accelerate our commercial build out and have already put key leadership personnel in place. Our plan is to launch with a lean, yet effective, commercial infrastructure to maximize the impact of ROLONTIS. We are closely monitoring the evolving market dynamics and continue to believe that launching a novel asset will benefit patients, our customers and our shareholders. Competing in this market is a significant opportunity for our company, and we'll be ready to go.

Our other late-stage clinical asset, poziotinib, targets hard-to-treat mutations in lung cancer. Results from the first cohort of the ZENITH20 trials, which were announced in December, were disappointing.

While the response rate of cohort 1 in this trial was lower than we expected, the positive signals that we observed provide support to the continued clinical evaluation of poziotinib in this patient population with significant unmet medical need. Dr. Lebel will give you a comprehensive update of the current status of the pozi clinical program later on the call.

Spectrum's focus is on the development of 2 late-stage assets and expanding the pipeline. Last year, we made significant progress in transitioning the company and now completed the shift from small niche products to higher-volume targets through divestiture of our legacy assets, advances in our product development pipeline and the acquisition of the FIT platform.

As I think about 2020, we are well funded. We're preparing to launch a product into the biggest market in the company's history. We have multiple data catalysts, and we have the development talent to realize the promise of our current assets. Additionally, we are seeking new business development opportunities that will complement our pipeline.

With that, I'm going to turn it over to Kurt to cover 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 a review of our continuing operations. Our SG&A expense for the fourth quarter of 2019 was $15.1 million versus $16.6 million in the previous year. R&D expense was $23.3 million versus $29.9 million in the fourth quarter of 2018. Our net loss for the quarter from continuing operations was $40.2 million versus $53.1 million in the comparable period of 2018. On a non-GAAP basis, which primarily backs out stock compensation costs, our loss for the quarter was $33.4 million.

As we prepare for the launch of ROLONTIS, we would expect to see an increase in our SG&A expense in the second half of the year. And while we have the key leadership positions in our commercial organization already on board, we will be hiring our sales team in the back half of this year.

We ended the quarter with $224 million in cash, plus marketable securities. This is down $28 million from the prior quarter. This cash balance gives us plenty of runway to continue the development and commercialization of our late-stage assets.

And 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 regarding our late-stage asset, ROLONTIS, which is being actively reviewed by the FDA. ROLONTIS is a novel, long-acting granulocyte-colony stimulating factor, seeking an indication for the treatment of neutropenia in patients receiving myelosuppressive cancer chemotherapy.

In October of last year, we submitted an updated BLA to the FDA, which the agency accepted for review with a PDUFA date of October 24, 2020. We are working closely with the FDA as it conducts its review of our BLA. The BLA is based on robust clinical data from 2 large pivotal randomized controlled trials. In both studies, ROLONTIS meant a prespecified endpoint of noninferiority in duration of severe neutropenia and met all secondary endpoints. The safety profile was similar to pegfilgrastim.

In October last year, we presented the Phase III data for ROLONTIS at the ASCO Supportive Care in Oncology Symposium in San Francisco. These 2 trials together enrolled 643 early-stage breast cancer patients. The analysis provided integrated efficacy and safety data that were consistent with results from the individual study.

Let me remind you that the ROLONTIS development program continues. I am pleased that an abstract with preclinical data looking at same-day dosing in our rodent model has been accepted for presentation at the upcoming AACR in April.

Now shifting gears. We are continuing to investigate poziotinib for the treatment of exon 20 insertion mutation in non-small cell lung cancer. Exon 20 insertion mutation are among the most difficult to treat. These patients and their physicians are in search of the first effective treatment option as there are no approved therapies for this indication.

ZENITH20 is a comprehensive, multicohort study, evaluating a broad range of lung cancer patients with specific mutation. As we announced in December, the top line results from ZENITH20 cohort 1, evaluating pozi in 115 previously treated EGFR patients with exon 20 insertion mutation, did not achieve the primary end point of objective response rate. Patient in this cohort received 16 milligrams per day of poziotinib. The intent-to-treat analysis showed that 17 patients had a formal resist response and 62 patients had stable disease for a 68.7 disease -- 68.7% disease control rate. The confirm objective response rate, or ORR, was 14.8%. The median duration of response was a noteworthy 7.4 months. The safety profile was in line with the type of adverse events seen with other second-generation EGFR tyrosine kinase inhibitors. While the study did not meet the primary end point, the data showed that the drug has real biologic activity that merits further investigation. The analysis shows that about 2/3 of the patients had temporary dose interruptions and 2/3 had dose reductions. These data also indicate that patients who stayed on therapy had a better response rate. So we are examining ways to enhance the ability of patients to stay under assigned dose for longer duration. We will be providing additional insights at a podium presentation at the 11th Annual Congress on Pulmonary and Respiratory Medicine in Amsterdam on March 18. Following the presentation, we plan to provide an update to investors on the program.

In summary, drug development is rarely a straight line. We are applying the learnings from cohort 1 and taking decisive actions going forward.

Let me remind you that ZENITH20 is a study with multiple independent cohorts. Cohort 2 has been fully enrolled and is evaluating pozi in, previously treated, HER2 patients. We expect top line results will be available for this cohort midyear. Cohort 3 is nearing full enrollment, and we expect results from this cohort by the end of the year.

We look forward to sharing more information on this program after our presentation in Amsterdam.

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. And before I shift to Q&A, I have something special to talk about. I'd like to take the opportunity to thank Shiv Kapoor for his many years of dedicated service to Spectrum. Shiv is going to be leaving Spectrum to pursue some entrepreneurial activities, and he's provided great contributions to this organization. And I got to tell you, he's been a great friend. He's a great person, a great dad, a husband, and a lot of fun to be around besides being very knowledgeable. He's going to be missed, and we wish you continued success in all your future endeavors, Shiv, and I really appreciate all you've done. And personally, thank you.

So with that, let's open the line for questions.

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Questions and Answers

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Operator [1]

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(Operator Instructions) And your first question comes from Maury Raycroft with Jefferies.

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Farzin Haque;Jefferies;Senior Associate, Equity Research, [2]

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This is Farzin on for Maury. So the question is regarding, after the ZENITH20 cohort 1 data, have you had a chance to assess how those reductions may have impacted the overall response rate? And since the readout, have you shortened the list of what variables may have contributed?

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

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Yes. Let me first start by saying that on the 18th, when we have, after the presentation, the data will be presented in great detail from cohort 1 and then after, what we'll do is we will have an investor call, we'll go over the data itself and also our strategy moving forward. Dr. Francois, I don't know if you'd like to add anything to that?

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

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Yes. Well -- good question. As I mentioned in my formal remarks there that the patients who were able to stay on drug longer had a better response rate and the details around that will be presented in Amsterdam at the lung meeting. So you'll have -- unfortunately, you'll have to wait a little bit more, a few weeks, before you get the full story.

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Farzin Haque;Jefferies;Senior Associate, Equity Research, [5]

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And for the second one is, what is the bar for success in HER2 exon 20 non-small cell lung cancer? And how much read-through is there from cohort 1? And if there are any plans to make changes to increase the chances of success?

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Francois Lebel, Spectrum Pharmaceuticals, Inc. - Chief Medical Officer [6]

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You're breaking up a little bit.

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

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Yes. The question, we couldn't hear the -- especially the first part of the question, we couldn't hear it.

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Farzin Haque;Jefferies;Senior Associate, Equity Research, [8]

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So what is the bar for success in HER2 exon 20, the cohort? And how much read-through is there from cohort 1? And if there are any plans to changes increase the chances of success?

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

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So as you know, we have given you the result of the study in terms of response rate of 14.8%. We have not disclosed publicly what the bar was. As you know, there are many other drugs in development, and we think it's a -- the result of a negotiation with the FDA, and we are not disclosing publicly that. And also, we have other cohorts that are maturing right now. So that's confidential at this stage.

So I would say the part for the bar, I'm sorry, -- was there another component to your question?

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Farzin Haque;Jefferies;Senior Associate, Equity Research, [10]

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So basically, how to make any changes to increase chances of success in the cohort 2, based on the cohort 1?

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Joseph W. Turgeon, Spectrum Pharmaceuticals, Inc. - President, CEO & Director [11]

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Well, cohort 2 is fully enrolled, okay? So we're just awaiting the maturing of that data. By midyear, we'll be able to show you exactly what the data sets. Again, we can't tell you what the outcome is till we see it. It's a different patient population. So we just don't know that. It's exon 20 and HER2 refractory. So there's nothing we can do. And I'll remind you that cohort 3 is almost fully enrolled, and we'll have that data late this year. So there's really nothing to do. But again, on that call, we have in the 18th, I'll remind you. Besides the data, we will go through our strategy, and what we can do going forward.

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Operator [12]

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And our next question comes from Mayank from B. Riley.

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Sahil Kazmi;B. Riley;Associate, [13]

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This is Sahil Kazmi on for Mayank. I appreciate the update. Just a couple of brief questions for me. First of all, regarding the ROLONTIS launch preparations, can you discuss kind of any of the strategy you've guided to in terms of -- given the fact that it will be a lean sales force what you'll be targeting, et cetera?

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Joseph W. Turgeon, Spectrum Pharmaceuticals, Inc. - President, CEO & Director [14]

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Yes, Tom, why don't you take that.

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Thomas J. Riga, Spectrum Pharmaceuticals, Inc. - Executive VP, COO & Chief Commercial Officer [15]

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Yes. Very much appreciate the questions. And our preparations are well underway, and we are really enthusiastic about the opportunity to launch into this market. And I think our -- the platform for launch really comes down to 4 things. And the first one you hit on, which is customer focus. I think how we target and segment this market is really contingent upon our success. Each of the segments of this space behave and are motivated by different things. So we are spending a lot of time studying the different segments of the business and how we will go about approaching the market in that light.

I think the second thing that we are spending a good bit of time looking at is patient access, whether that be through the various stakeholders or health care costs for patients are always a concern in having a patient access program that enables support for patients is a really important component to launch.

I think thirdly is supply, and we are confident in the supply that we'll bring to the market. And fourth is, really, the customer connectivity that the field force that we're putting on the field will inevitably have. So I think in summary, we're feeling really good about our proposition of competing in a very large market and are anxiously awaiting the opportunity to do so.

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Sahil Kazmi;B. Riley;Associate, [16]

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Great. I appreciate the color. And maybe another question regarding ROLONTIS. Just any additional sort of incremental color you can provide on the abstract at AACR? And how do you think about the implications in the clinic for same-day doses?

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

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Yes. Listen, the abstract has been accepted. We can't go into the data, there's embargo on that. You can't really talk about that. So what you -- the abstract has been accepted and we'll -- at that time, we can discuss the data that's in there.

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Operator [18]

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And our next question comes from Alethia Young from Cantor Fitzgerald.

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Li Wang Watsek, Cantor Fitzgerald & Co., Research Division - Research Analyst [19]

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This is just Li on for Alethia. Just a couple of questions from Francois. So first, just kind of curious have you met with FDA to sort of review the cohort 1 data and its path forward? And then how is enrollment going in the cohort 5 and the [device maintaining itself] (inaudible) [throughout the process].

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Francois Lebel, Spectrum Pharmaceuticals, Inc. - Chief Medical Officer [20]

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So Alethia, it is Francois. Good to have your question. So we have not disclosed any communication with the FDA, we -- there is interaction on an ongoing basis. And as to the enrollment, we have -- the enrollment -- we're satisfied with the enrollment. And actually, we've stated previously that in spite of the -- missing the primary end point in cohorts 1, enrollment continues to be very strong and requests for drug continues to be very strong. So investigators, clinicians continue to be very interested in dosing patients. They clearly remain excited in spite of the primary end point. All investigators that we've shown the waterfall plot, and as you've seen it, remain very convinced that there is real activity there.

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Operator [21]

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And our next question comes from Ed White of H.C. Wainwright.

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Edward Patrick White, H.C. Wainwright & Co, LLC, Research Division - MD of Equity Research & Senior Healthcare Analyst [22]

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And before I ask, I just want to thank Shiv as well for all the years of help that he has given me. I really appreciate it, and I wish you a lot of success in the future.

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Shivpreet Kapoor, Spectrum Pharmaceuticals, Inc. - VP of Strategic Planning & IR [23]

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Thanks, Ed.

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Edward Patrick White, H.C. Wainwright & Co, LLC, Research Division - MD of Equity Research & Senior Healthcare Analyst [24]

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You're welcome. So just a question on pozi. The basket trial was initiated at MD Anderson. Is this trial going to continue? Or has there been any change to the status of that trial?

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

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Yes. No, you're absolutely correct. And the basket trial continues. Obviously, our emphasis is on the pivotal aspect of the 3 cohorts in our lung cancer trial, but we absolutely continue it and are interested in pursuing a basket study.

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Edward Patrick White, H.C. Wainwright & Co, LLC, Research Division - MD of Equity Research & Senior Healthcare Analyst [26]

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Okay. And then just on -- you had mentioned cohorts 2 and 3. Is there any update on cohort 4?

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Francois Lebel, Spectrum Pharmaceuticals, Inc. - Chief Medical Officer [27]

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It continues to enroll. I mean, the reason we only mentioned cohort 2 and 3 is because -- simply to remind you cohort 2 is fully enrolled. And as you know, the cohort 2 was a 16 milligram. Cohort 3 and 4 are both at 16 milligram as well. And cohort 3 is nearly completely enrolled. And cohort 4 is -- first-line HER2 is not -- the genetics of that are not in the primary panel that clinicians doing with their patients. So therefore, it takes a little longer to recruit that cohort, but it continues to enroll well.

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Edward Patrick White, H.C. Wainwright & Co, LLC, Research Division - MD of Equity Research & Senior Healthcare Analyst [28]

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Okay. And then just -- you didn't mention the FIT platform. I know we're expecting enrollment of 20 patients in the Phase I trial in non-Hodgkin's lymphoma. I was just wondering if you can give any update on the status of that trial.

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Francois Lebel, Spectrum Pharmaceuticals, Inc. - Chief Medical Officer [29]

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Yes, the status does not change. We continue to work very closely with the investigator involved and the PI being at UCLA, Dr. Timmerman. So we continue to review data and look at the data with him to make sure we have a full understanding of the platform, and we are working very aggressively with him to restart. There was no clinical enroll here. The prior company had run out of funds, and there was no regulatory or clinical reason to delay enrollment. And we are simply going through the regulatory process of reactivating the trial. And we'll have an update for you later in the year as to what to expect.

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Edward Patrick White, H.C. Wainwright & Co, LLC, Research Division - MD of Equity Research & Senior Healthcare Analyst [30]

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Okay. And Kurt, maybe just a question for you. Thank you for the SG&A guidance commentary. I was just wondering if you can have any comments on SG&A -- excuse me, R&D expense in 2020?

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Kurt A. Gustafson, Spectrum Pharmaceuticals, Inc. - Executive VP, Principal Accounting Officer & CFO [31]

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Yes. Ed, at this point, we're not giving any specific guidance on R&D expense. A lot of this is a function of when we buy material. Our accounting practice is to -- as we buy pre-commercial inventory, we expense that as R&D expense. So I don't have any specific guidance on that for you. But I think you'll agree that ending the year with $224 million in cash gives us plenty of runway to continue the development program and the commercialization of ROLONTIS.

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Edward Patrick White, H.C. Wainwright & Co, LLC, Research Division - MD of Equity Research & Senior Healthcare Analyst [32]

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That was my next question. If you would -- could give any guidance on how long that cash will last? What your runway -- what do you think your runway is?

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Kurt A. Gustafson, Spectrum Pharmaceuticals, Inc. - Executive VP, Principal Accounting Officer & CFO [33]

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The only guidance, I would give you, Ed, is -- so the ending balance is $224 million, we burned $28 million in the quarter. If you take a look at the last couple of quarters, we're in that sort of $30 million range. So we do expect SG&A expense to increase a little bit in the second half of this year. But I think if you take a look at the trends, our balance should provide us plenty of runway.

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Operator [34]

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And our next question comes from Michael Schmidt of Guggenheim.

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Yue-Wen Zhu, Guggenheim Securities, LLC, Research Division - Associate [35]

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This is Charles Yue-Wen on for Michael Schmidt. One quick one here. To what degree would you say that some of this dose interruption or the learnings from the dose reduction from cohort 1 might be potentially applied to ongoing, I guess, cohorts that are not quite yet mature, such as 3 or 4, for example?

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Francois Lebel, Spectrum Pharmaceuticals, Inc. - Chief Medical Officer [36]

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Yes, very good question, Michael. But it's not Michael, right? You said it's Charles. Okay. Terrific.

So it's like I said, there is -- and I can't really give you that much detail today because it's got to be presented in Amsterdam. But what we have noted is clearly that patients -- it's key that patients have to be kept on drug. Dose interruption or dose reduction may impact the response rate. So we are looking very aggressively to improve the ability to keep patients on drug and in Amsterdam will disclose what we have in mind here as well as provide the data, so that you can really see the correlation between if the patient was -- had drug interruption or not. I just want to clarify here that drug interruption means temporary stopping the drug for, for example, an adverse event. And it's not permanent interruption of the drug. We have disclosed previously that permanent drug-related -- permanent drug discontinuation was of the order of 10%. What we're talking about here is short interruption in dosing sort of allowing and helping the patient to recover from an AE, and they get back on drug and they continue.

So hopefully, that answers you.

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Yue-Wen Zhu, Guggenheim Securities, LLC, Research Division - Associate [37]

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Great. That's helpful. And I might have missed this one a bit earlier on ROLONTIS and the Neulasta long-acting GCSF market. But how do you see the trajectory of unit price or overall market opportunity erosion continuing for this market? And I guess, to what degree would you expect such trends from other markets such as Neupogen or Remicade to kind of repeat within this Neulasta market.

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Joseph W. Turgeon, Spectrum Pharmaceuticals, Inc. - President, CEO & Director [38]

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Tom, do you want to take that?

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Thomas J. Riga, Spectrum Pharmaceuticals, Inc. - Executive VP, COO & Chief Commercial Officer [39]

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Yes, Charles, it's Tom. We're watching this pretty closely. So I think the way to think about it is, if you look at Amgen's average selling price, the biosimilar pricing is in the range between 5% and 13% decline off of the average selling price. So you do see market erosion, but it's behaving more like a competitive branded space than that of a generic. So I think when you're looking at this market today, it sits north of $3 billion where prior to biosimilar entrants it was sitting at $4 billion. So there definitely is erosion. But we see this as the biosimilar entrants have done a few things. One, they've shown an ability to compete, they currently have north of 25% of the market; and two, to date, the pricing has been rational, and the rate of decline is that of a competitive branded space for versus that of a generic. So as we look at the launch trajectory of ROLONTIS in the market that we will be launching into, it will no doubt be competitive. But having a novel asset that enables you to control your own discounts, your own pricing, independent of any of the other behavior in the market, certainly, will be advantage for this asset and our ability to compete within the space. Hope that answers your question?

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Operator [40]

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And there are no further questions at this time. And I would like to hand the call back over to Mr. Joe Turgeon.

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

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With no further questions, I thank everybody for their interest. I again thank and wish Shiv well, and I appreciate everybody's interest in the call. Thank you very much.

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Operator [42]

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