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spk03: Good day and thank you for standing by. Welcome to the Spectrum Pharmaceuticals third quarter 2022 earnings call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you'll need to press star 1-1 on your telephone. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Michael Grabo, Executive Vice President and Chief Business Officer. Please go ahead.
spk05: Thank you, operator. Welcome to Spectrum Pharmaceuticals' third quarter 2022 earnings call. With me on today's call are Spectrum's President and Chief Executive Officer, Tom Riga, Executive Vice President and Chief Medical Officer, Dr. Francois Lebel, Executive Vice President and Chief Financial Officer, Nora Brennan, and Senior Vice President, Sales and Marketing, Erin Miller. Earlier today, Spectrum issued a press release detailing its financial results for the three-month ended September 30th, 2022. This press release and a webcast of this call can be accessed through the Investor Relations section of the Spectrum website at sppirx.com. Before we get started, I would like to reference 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 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. The telephone replay will be available shortly after completion of this call. The archived webcast will be available for one year on our website at SPPIRX.com. For the benefit of those who may be listening to the replay or archived webcast, this call was held on November 10th, 2022. Since then, Spectrum may have made announcements related to the topics discussed, so please refer to the company's most recent press releases and SEC filings. And with that, I'll turn the call over to Spectrum's president and CEO, Tom Riga.
spk04: Thanks, Mike. Good afternoon, everybody, and thank you for joining us on today's call. The third quarter was very busy for the company. highlighted by two significant regulatory events, along with the signing of a strategic debt financing agreement that improved the balance sheet. Each of these topics will be covered on today's call. I am thrilled that the FDA approved Rolvidon on September 9th, and in less than six weeks, we were able to make the product commercially available to our customers. As of October 18th, Rolvidon is commercially available. And I am pleased that the first commercial sale happened within days of availability. This marks a significant accomplishment for Spectrum and our partner at Homni Pharmaceuticals. We now turn our focus to being a commercial organization. The market opportunity we are entering is the largest in Spectrum's history and one where our leadership team has extensive experience. The estimated $2 billion long-acting growth factor market is both competitive and complex, but we feel Spectrum is uniquely qualified to capitalize on this significant opportunity. There are several factors working in our favor that will allow us to maximize the launch trajectory of Rolvidon. First, it has proven to be safe and effective in two large Phase III studies. Additionally, we are launching with a full suite of resources to support patients and provide customers with the best possible experience. And finally, we hired a strong team with extensive oncology market knowledge, customer connectivity, and learnings from in-depth market research. Let me share with you some of the details. Rovodan is a novel product with a unique molecular structure and has proven to be safe and effective in over 600 patients in the clinical program. The incidence and duration of severe neutropenia is a leading indicator that can predict downstream febrile neutropenia and associated complications. In two large phase three head-to-head studies, Rovodan demonstrated an effect on both the incidence and duration of severe neutropenia and demonstrated non-inferiority versus the market leader in LASTA. Having a safe and effective product is the foundation of commercial success. Volvodon is not a biosimilar and is the first full BLA to enter the long-acting growth factor space in over 20 years. An estimated 1.1 million units of long-acting GCSF are administered in the United States every year. And the market is fairly evenly split into three segments, community oncology, 340B hospitals, and non-340B hospitals. Right now, Mulasta represents 60% of the market, while biosimilars represent 40. There are currently four biosimilars available on the market, with two driving a disproportionate concentration of their share. The product mix is evolving as the on-body device has lost significant share over the past few quarters. Providers are open to change, and we believe that our strategy will enable us to compete across segments. We've done a tremendous amount of qualitative and quantitative research with oncologists, buyers, and payers to understand what drives behavior. In the early goings, the community oncology segment will likely be the fastest path to a robust launch trajectory. Over the past several years, community oncology practices have been facing headwinds, which have led to practice consolidation and acquisition by hospitals. This consolidation has resulted in more centralized decision-making. This segment is receptive to tailored contracting and able to make nimble decisions across their networks. Historically, the long-acting growth factor market was stable and dependable as it relates to average selling price and reimbursement dynamics. With multiple products competing in the space has created an unpredictable business climate for the segment to manage their operations. This unpredictability is driven by the fact that the innovator product and the biosimilars are dependent on one another's discounting decisions. which are made across multiple stakeholders. Now more than ever, customers are looking for solutions that provide them predictability in managing their growth factor business in the near and long term. Rolvidon, being a novel product that is not a biosimilar, offers independent reimbursement not tied to the innovator product or the biosimilar. Ultimately, this means that we will have more flexibility on pricing, contracting, and discounting decisions that will offer customers greater visibility into their near-term and long-term business decisions. Finally, the community oncology segment has high utilization of patient access and support programs, and we are bringing a comprehensive offering to the market. We have taken the time to understand the patient journey and the financial burden on cancer patients, and have built a best-in-class customer support system that will include copay assistance, reimbursement support, and dedicated employees to help ensure our customers and ultimately their patients have the optimal experience with Rolvidon. We will first establish Rolvidon with community oncology practices, followed by 340B and non-340B hospitals. We have a comprehensive strategy which will enable us to compete successfully in the evolving oncology ecosystem. Key to this strategy was to build a strong and efficient commercial team with extensive oncology experience and significant customer relationships. The commercial team includes personnel in sales, marketing, access and reimbursement, commercial operations, and medical affairs. We have already hired nearly all 40 targeted positions. The team is fully trained, actively selling, and executing our launch strategy. Having a team is a competitive advantage in an environment where access is increasingly more restricted, and face-to-face time in front of customers is at a premium. We are confident that the people that we hire and the plan that we have developed gives us the best opportunity to capitalize on the launch of Rolvidon. Turning now to Odiotin of NDA, which is under active review at the FDA with the PDUFA date of November 24th. We had an ODAC meeting in September and received a negative vote of nine to four. This obviously was not the outcome we had expected, and we continue to believe that this product could present a meaningful treatment option for patients with this rare form of lung cancer for whom other treatments have failed. While we cannot predict what the FDA will ultimately decide. We are planning for various outcomes, in particular, one in which we do not receive approval. In the event of an unfavorable determination, we intend to be pragmatic in our approach, which will include further managing costs and implementing organizational adjustments. We will continue to act in the best interest of the company, our shareholders, and most importantly, the patients who depend on our medicines. We will provide timely updates on the Poseyotinib program once we receive word from the FDA. In the meantime, we are heavily focused on the successful launch of Rolodon. And as you will hear from Nora, we have just over $100 million in cash and are very well capitalized to execute on our strategy. With that, let me turn the call over to Nora to review our financials.
spk01: Thank you, Tom. For the third quarter of 2022, total research and development expenses were $13.3 million, as compared to $20.9 million in the same period in 2021. The decrease of $7.5 million is primarily due to completed program spend associated with Robodon, as well as a decrease in personnel expenses of $3 million related to the strategic restructuring that began in January of 2022. Selling general and administrative expenses were $8.3 million in the quarter, compared to $12.2 million in the same period in 2021. The decrease of $4 million was primarily due to lower costs associated with employee compensation benefits and other headcount-related expenses related to the reduction of workforce announced in January, in addition to decreases in stock-based compensation. The net loss for the quarter was $21.9 million from continuing operations, or 12 cents per share, compared to a net loss of $33.1 million or $0.21 per share in the comparable period in 2021. Operating cash burn was approximately $18 million in Q3 as compared to $25 million in the same period last year. This reduction is part of our ongoing strategic effort to reduce the overall cash burn of the company while optimizing our investments in late-stage assets. We ended the third quarter with approximately $100.3 million in cash plus marketable securities, which includes $30 million drawn down as part of the $65 million debt financing agreement we closed with SLR Capital Partners during the quarter. Access to the additional $35 million of financing will be made available in three tranches subject to achievement of pre-specified regulatory and financial milestones. The tranches are available for drawdown at our discretion at various points until November 15, 2023. With this financing and cash on hand, we believe that we have the reserve to fund company operations through 2024. And with that, operators, please open the line for questions.
spk03: Thank you. As a reminder, to ask a question, you'll need to press star 1-1 on your telephone. Please stand by while we compile the Q&A roster.
spk07: One moment.
spk03: Our first question comes from, I'm sorry, from Maury, from Jeffries, the line is open.
spk02: Hi, this is Kevin Strang, I'm from Maury. Congrats on the update and thanks for taking my questions. First question was just on, you know, what information you're going to be tracking during the launch and what metrics are you going to provide to the street on the next earnings call and going forward? And then if you have any early thoughts on when you would be able to provide guidance as well.
spk04: Kevin, how are you? I'll start here. We're obviously thrilled with the approval, the launch, having the product be available, seeing the early receptivity. We don't plan on providing revenue guidance here today. To your question, we're going to have a lot of metrics that we'll be tracking internally. I think the one that's ultimately most important and relevant to the street here will be revenue that we will be in reporting here as of the fourth quarter and onward. And we'll also be providing relevant metrics as it relates to customer reach as well as access that will happen over the course of launch. But I think the revenue line is one that I think will be most relevant here in the near term.
spk02: Okay, great. Thank you, Tom. And then just a follow-up question for Rolvodon. It's, you know, priced at a slight premium to most of the biosimilars, but less than New Can you just elaborate on the payer feedback and sort of market research that makes the price you pick the sweet spot for commercialization? And then, you know, if there's any other key points of differentiating that your differentiation that you're pointing out besides pricing that have been resonating with customers so far.
spk04: Yeah, I think, I think foundationally the safety and efficacy of the product has to resonate. And I think early feedback is, it is, I think having, really robust phase three program of over 600 patients that I think that's foundational. A lot of research went into pricing. I think we're launching this as a brand. It is an innovative BLA, and we made that decision to be 28% lower than the other innovative product. I think what you're referring to is somewhat of the average selling price, and I think it's important to differentiate the two Our WAC price is the wholesale acquisition price. That is at a 28% reduction from the other innovative product. And we thought, based on all of our research with customers, with payers, that enabled us the sweet spot to have our customers be receptive to the product as well as our ability to gain access.
spk02: Great. Thank you, and I'll hop back in the queue.
spk04: Thanks, Kevin.
spk03: Thank you. And we have a question, one moment. From Ed White with 18 Waymark, your line is open.
spk06: Good evening. Thanks for taking my questions. Hey, Ed. Hey, Tom. So, just a couple of questions on the launch. Have you, can you give us any feedback from the payers? Have there been any sticking points? as far as the payers go? Or does it look like it's going pretty smooth?
spk04: Ed, thanks for the question. I think as it relates to payers, we spend a lot of time in advance and have engaged payers. But I think it starts with who is your customer. And that seems like an easy question, but it's a very important one strategically. And for us, we believe the customer is the physician who's ultimately treating patients. And I think A lot of that work ultimately resides there. We have 49 targeted payers that represent over half of the covered lives that are relevant in this particular marketplace. And we have understood their expectations. The cycle time of their contracts, some are annual, some are semiannual. So each one will be evaluated strategically. So I think we have a good idea of what they're expecting, how we plan to approach it. And our strategy here is to be clear on who our customer is and then strategically contract with payers as we engage those particular customers and their books of business.
spk06: Okay. Thanks, Tom. And just looking forward, maybe a question for Nora. Just with the launch, I was wondering if there's any guidance you can give us on SG&A costs for the fourth quarter. would we expect to see a big bump in the fourth quarter or, you know, should we see something expected more to be over the next few quarters? And then on R&D, you know, pretty much the same question here. How should we be thinking of R&D spend going forward after these two, you know, Rolodon and POSI? I mean, is there any guidance you can give us on that? Thank you.
spk04: Yeah, and let me start. Hopefully it can be helpful, and then Nora will jump in here. So I think first and foremost, a core tenet that we've had since January has been to really scrutinize the balance sheet and reduce the operating cash burn of the company. So I think if you look at the burn rates of 2021 and even starting in 2022, company was burning somewhere in the neighborhood of $30 million a quarter. And I think this quarter you're seeing that burn rate go to $17.9 million, which I think speaks to the discipline that we're implementing to ensure we are making thoughtful decisions in our investments as it relates to our late-stage assets. Because we are fully funded for the launch of Volantis and Robodon, and that is the focus of where we go. As you think about the fourth quarter, there will be an uptick in SG&A costs. We have not given guidance on that one. But I think if you think about the base of what we had, the incremental FTEs that we've added is somewhere in the neighborhood of 20 to 25 when we start ramping the commercial organization to 40. And I think the specific question on R&D, I think that's one that I'll punt until we have visibility into the FDA's ultimate decision on posiotomy, because I think that is an important component to answer that question accurately. So we have, we are prepared for that decision, and we will make it in timely and due order, and we'll be back in touch with you here in the not too distant future, which I think will give you more color into how we're thinking. depending on the ultimate outcome.
spk06: And, Tom, you said you're ready for POSI if there's a positive outcome there. Does that include both manufacturing of the product? Are you ready on that end? And also, as far as Salesforce goes?
spk04: Yeah, so I think coming out of ODAC, obviously we had expected a different outcome there, and having a 9-4 vote, we fully understand that ODAC is not the judge and jury here, FDA is, but I think history has these nuggets of truth, and 80% of the time they seem to follow the ODAC vote. So we're obviously preparing for all of the potential outcomes up to and including the a CRL or approval. And I think in both of those scenarios, we are going to be prepared to be pragmatic and make decisions quite quickly.
spk06: Thanks, Thomas. And my last question, if I may, just on the pipeline, how should we be thinking about the pipeline going forward, you know, regardless of the POSI outcome? Are you looking at BD opportunities? Is there anything internally we should be thinking of but what's your big picture overall strategy for the pipeline? Thanks.
spk04: Yeah, thank you, Ed. Great question. I think big picture for the company, we're obviously thrilled to have the approval of Rolodon, not for just the approval, but for what opportunity success would bring as that launch comes into fold. So Poseyotnib, we will have clarity with that program. here in the not too distant future, but ultimately the future funding of business development, which really is the core of our company, the core of what we believe is important to advance the future of the company, all of those things are largely contingent upon the successful execution of what we have in front of us. And that's why being crystal clear in our focus of our balance sheet, our efforts, and our energy to really ensure the successful launch of Volvedon is critically important to both the near-term and long-term strategy of the organization, because clearly having a commercial product is great, but having the capital to enable the company to invest further into business development and expansion or other M&A-type activity is certainly of interest as we go forward.
spk06: Great. Thanks, Tom, for taking my questions.
spk03: Thank you. And our next question comes from Prakhar Agrawal with Cantor. Your line is open.
spk00: Hi, thanks for taking my questions. So the first one on pricing, Tom, you mentioned the pricing of 30% discount to branded new elastos. So maybe talk about how would you expect ASP at steady state to pan out? What do you expect? Is it fair to assume that the level of discounting and your ASP will be much higher than both biosimilars and granted new LASTA, given you're being very strategic with the peers? And I had a follow-up.
spk04: Yeah, thanks for the question, Prakhar. I think important to your question is the fact that the unit demand for growth factor has remained unchanged for the past several years. There's 1.1 million units of growth factor that's administered, and that demand has been consistent. What drives that market down ultimately is the reductions in ASP that is largely the result of the innovator and the biosimilar being inevitably tied together in their discounting decisions. I think having a unique ability to discount price our product independent as a unique chemical entity enables us to make those decisions strategically. So initially, the wholesale acquisition price is the basis of reimbursement until average selling price is established. That will happen over the first few quarters of launch. And then after that, when the average selling price is established, that is in our direct control with the discounting decisions that we ultimately make and those ASP reportable discounts that we put into CMS. So we will be in unilateral control of the discounts put into the market, and then the subsequent decline in average selling price will be ours to manage.
spk00: Got it. Thanks for the color. And maybe you talked about the corporate and patient assistance program, so maybe if you can provide more details around that and if there are any differences between your programs and some of the other products in the market?
spk04: I think it's important to have, if you're treating this like a brand, I think customer expectations are that you're thoughtful of the entire patient journey, and we have been. So our programs, as I had mentioned in my prepared remarks, is going to be a full suite of programs, both access and retention. Access and reimbursement program, co-pay assistance program, both in the federally funded and non-federally funded populations. There are differences in how that's executed. But we will have both the programs themselves as well as dedicated staff that will help customers navigate. So rather than compare and contrast what other products have, I think the way I would position it here is we are bringing a compelling offering to the market, treating this as a brand, and I think our customers are receiving it well here out of the gate.
spk00: Okay. Thank you for the call, Tom, and looking forward to the next update.
spk03: Thanks a lot. Thank you. And there are no other questions in the queue. I'd like to turn the call back to Mr. Tom Riga for any closing remarks.
spk04: Thank you for your participation on the call today and your interest in Spectrum Pharmaceuticals. It's been a busy and active time in the company, and we're excited to give you further updates on the launch of Rovidon here as we move forward. So if you have any questions, please feel free to reach out, and we'll be in touch.
spk03: This concludes today's conference call. Thank you for participating. You may now disconnect.
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