Spectrum Pharmaceuticals, Inc. (NasdaqGM: SPPI), a commercial-stage biotechnology company with a primary focus in oncology, today reported financial results for the fourth quarter and fiscal year ended December 31, 2009.
“Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company's Own Stock”
Company Operations and Performance
"The year 2009 was filled with notable accomplishments for Spectrum that have laid the groundwork for continued and significant growth in 2010 and beyond," said Rajesh C. Shrotriya, MD, Chairman and Chief Executive Officer of Spectrum Pharmaceuticals, Inc. "The stabilization of the ZEVALIN® brand in 2009 and the signing of two partnerships for the Asian territories for apaziquone (EOquin®) provided us with the resources to acquire Belinostat, a novel HDAC inhibitor in pivotal trials for peripheral T-Cell lymphoma (PTCL). As of today, we have two FDA-approved and marketed anti-cancer drugs ZEVALIN and FUSILEV, that in 2009 generated approximately $28.2M in product revenue. In addition, we have two novel anti-cancer drugs in late stage pivotal trials being conducted under a Special Protocol Assessment (SPA) from the FDA. These are Belinostat for PTCL and apaziquone for bladder cancer. In 2009 we completed enrollment of over 1,600 patients in clinical trials with apaziquone. We currently expect to file the New Drug Applications for Belinostat and apaziquone in 2011 and 2012, respectively. We have been successful in growing Spectrum through strict fiscal discipline, portfolio management, and an opportunistic approach to drug acquisitions."
Fourth Quarter Results Ended December 31, 2009
Consolidated revenue of $8.6 million was comprised of product sales of $5.2 million - $5.1 million from ZEVALIN, an increase of 8.5% over third quarter 2009, and $0.1 million from FUSILEV - $1.5 million attributable to the milestone payment upon full enrollment of the apaziquone Phase 3 trials, and $1.9 million attributable to the amortization of the Allergan licensing fee. This compares to $8.0 million in revenue in the same period in 2008. The Company recorded a net profit of $10.2 million, or $0.21 (basic earnings) and $0.20 (diluted earnings) per share, compared to a net loss of $8.9 million, or ($0.28) basic and diluted loss per share, in the fourth quarter of 2008, after reporting $19.8 million of income resulting from the reclassification of common stock warrants from equity to liability. Total research and development expenses were $3.5 million, as compared to $7.6 million in the same period of 2008, a $4.1 million, or 54% decrease, mainly due to sharing by our partner, Allergan, Inc., of apaziquone-related development costs, and a reduction in development costs related to other pipeline products. Selling, general and administrative expenses were $11.1 million compared to the $6.2 million in the same period in 2008. The $4.9 million increase was attributable to the direct cost of commercialization activities related to ZEVALIN and FUSILEV and related payroll costs.
Fiscal Year End Results Ended December 31, 2009
Consolidated revenue of $38.0 million was comprised of product sales of $28.2 million - of which $15.7 million derived from ZEVALIN and $12.5 million from FUSILEV - $1.5 million attributable to the milestone payment upon full enrollment of the apaziquone Phase 3 trials, and $8.3 million attributable to the amortization of the Allergan licensing fee. This consolidated revenue compares to $28.7 million for the same period in 2008, which was comprised of approximately $7.7 million and $0.3 million derived from FUSILEV and ZEVALIN sales. After the recording of $8.1 million income resulting from the reclassification of common stock warrant from equity to liability, the Company recorded a net loss of $19.0 million, or ($0.48) basic and diluted loss per share, compared to a net loss of $14.2 million, or ($0.45) basic and diluted loss per share, in the same period of 2008. Research and development expenses were $21.1 million, as compared to $26.7 million in the same period of 2008, a $5.6 million, or 21% decrease, mainly due to sharing by our partner, Allergan Inc., of apaziquone-related development costs, and a reduction in development costs related to other pipeline products. Selling, general and administrative expenses were $33.6 million, compared to the $15.2 million in the same period in 2008, attributable to the direct cost of commercialization activities related to ZEVALIN and FUSILEV and related payroll costs.
Net cash used in operations in the fiscal year ended December 31, 2009 was $17.6 million compared to approximately $8.0 million during 2008, stated after revenues of approximately $20.7 million from the sale of interests in certain non-core assets. The 2009 operating cash outflows are reflective of higher selling, general, and administrative expenses due, in a large part, to the marketing efforts associated with ZEVALIN, substantially mitigated by revenues from ZEVALIN and FUSILEV and the participation by Allergan Inc. in apaziquone-related development expenses.
As of December 31, 2009, the Company had cash and total investments of approximately $125 million, compared to approximately $78 million as of December 31, 2008. Currently there are approximately 49 million shares of common stock outstanding.
Restatement of Financial Statements
As more fully described in the Company's Annual Report on Form 10K for the fiscal year ended December 31, 2009, the common stock warrants issued in connection with registered common stock offerings during 2005 and 2009, were previously classified as equity. In connection with the audit for the fiscal year 2009, the Company, in consultation with its independent registered public accounting firm, Ernst & Young LLP, reassessed the "Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company's Own Stock", a highly complex area of accounting under US Generally Accepted Accounting Principles. In view of an interpretation that these common stock warrants could, under highly remote theoretical circumstances require net-cash-settlement, the Company's audit committee determined that recordation of common stock warrants as liabilities was required under US GAAP. Accordingly, the Company made accounting adjustments restating previously issued consolidated financial statements, including the quarterly condensed consolidated financial statements for the periods ended March 31, 2008 through September 30, 2009.
"The restatement does not have any impact on the financial statement amounts previously reported for the Company's cash balances, assets, revenues, operating costs and expenses, or reported net cash flows for any of the restated years, or any quarterly period in those years," said Shyam Kumaria, Vice President of Finance.
In our Form 10-K for the fiscal year ended December 31, 2009, we have reflected the necessary adjustments to previously filed financial statements. We have not amended such previously filed Annual Reports on Form 10-K for the fiscal years ended December 31, 2005, 2006, 2007 and 2008, or the Quarterly Reports on Form 10-Q for the periods ended September 30, 2005 through September 30, 2009, which previously issued statements should thus no longer be relied upon. For further information regarding the restatement, please read our Annual Report on Form 10-K for the fiscal year ended December 31, 2009.
Upcoming Company Milestones
- Continue to grow the ZEVALIN brand, currently approved for:
- Treatment of patients with previously untreated follicular non-Hodgkin's lymphoma, who achieve a partial or complete response to first-line chemotherapy; and
- Treatment of patients with relapsed or refractory, low-grade or follicular B-cell non-Hodgkin's lymphoma.
- Pursue removal of the bioscan requirement prior to ZEVALIN administration;
- Pursue consistent reimbursement for ZEVALIN in the community setting.
- Submit requested FUSILEV data in colorectal cancer to the FDA in the second half of 2010.
- Peripheral T-Cell Lymphoma
- File NDA in 2011, with a potential approval in late 2011 or early 2012.
- Carcinoma of Unknown Primary
- Target complete enrollment by year-end in the ongoing Phase 2 trial that is being conducted and 100% funded by TopoTarget.
- Other tumor types
- Explore additional trials in additional indications.
- Phase 3 data expected in first quarter 2012; and
- Initiate a multiple-instillation trial in non-muscle invasive bladder cancer by year-end 2010.
SOURCE Spectrum Pharmaceuticals