Spectrum Pharmaceuticals, Inc. CANCER TAKES THE LIVES OF OVER SEVEN MILLION PEOPLE WORLDWIDE EACH YEAR www.spectrumpharm.com 157 Technology Drive, Irvine, California 92618 Telephone 949.788.6700 2005 Annual Report spECTRUM PHARMACEUTicALS, INC. SPECTRUM O U R T E A M PHARMACEUTicALS BOARD OF DIRECTORS MANAGEMENT TEAM OUTSIDE COUNSEL Rajesh C. Shrotriya, M.D. Rajesh C. Shrotriya, M.D. Latham & Watkins LLP Chairman of the Board, Chief Executive Officer Chairman, Chief Executive Officer & President Costa Mesa, California is COMMITTED TO & President, Spectrum Pharmaceuticals, Inc. Luigi Lenaz, M.D. I NDEPENDENT A UDITORS Richard D. Fulmer, M.B.A. Chief Scientific Officer Kelly & Company Former Vice President, Licensing and Development, Costa Mesa, California IMPROVING THE and Vice President of Marketing, Pfizer Inc. Shyam K. Kumaria, CPA, MBA Vice President, Finance T R A N S F E R A GENT Stuart M. Krassner, Sc.D., Ph.D. U.S. Stock Transfer Corporation LIVES OF PEOPLE Professor Emeritus of Developmental and Russell L. Skibsted Glendale, California Cell Biology at the School of Biological Sciences Senior Vice President, Chief Business Officer University of California at Irvine SEC F O R M 1 0 - K Ashok Y. Gore, Ph.D. Please see the enclosed Annual Report on Form WHO ARE FIGHTING Anthony E. Maida, III, M.A., M.B.A. Senior Vice President, Pharmaceutical 10-K filed with the Securities and Exchange Chairman, BioConsul Drug Development Operations & Regulatory Compliance Commission for a more detailed description Corporation and DendriTherapeutics, Inc. of the Company’s business, financial and other Consultant to various Venture Capital, William N. Pedranti, Esq. information. This Form 10-K Report is also CANCER Pharmaceutical and Investment Funds Vice President, General Counsel available without charge upon written request to: Investor Relations Dilip J. Mehta, M.D., Ph.D. CORPORATE HEADQUARTERS Spectrum Pharmaceuticals, Inc. Former Senior Vice President, 157 Technology Drive 157 Technology Drive U.S. Clinical Research, Pfizer Inc. Irvine, California 92618 Irvine, California 92618 (949) 788-6700 Julius A. Vida, Ph.D. (949) 788-6706 Fax WE B SITE President, Vida International Pharmaceutical www.spectrumpharm.com Consultants; Former Vice President, Business Development, Licensing & Strategic Planning, M AR K E T F O R C O M M O N S TOC K Bristol-Myers Squibb Company NASDAQ National Market Trading Symbol: SPPI This report contains forward-looking statements regarding future events and the future performance of Spectrum Pharmaceuticals, Inc. that involve risks and uncertainties that Cover Image: Bladder cancer cells, © 2000 American Society of Clinical Pathologists could cause actual results to differ materially from the results contemplated by the forward-looking statements. Risks that could cause results to differ include risks described in the Cancer death statistic from World Health Organization enclosed Annual Report on Form 10K and other risks are described in further detail in the Company’s other reports filed with the Securities and Exchange Commission. As we work to improve the treatment options for cancer patients, we are committed to growing our company by re- ducing risk and creating new opportunities through disciplined science and strategic planning. We reduce risk and create shareholder value by 1) maintaining a diversified portfolio,2) focusing on late-stage, niche oncology drug candidates with known mechanisms of action, and 3) by financing pipeline development with multiple sources of funding, such as partnering and co-development arrangements and near-term revenue opportunities (such as with our generics collaboration with PAR Pharmaceutical) in order to reduce the need for dilution to our shareholders. 2005 HIGHLIGHTS PRODUC ts PEOP L E + Completed enrollment in several clinical trials: + Added former Pfizer executive to the Board of Satraplatin enrollment ahead of plan with more than Directors with background in marketing and sales 900 patents for hormone-refractory prostate cancer; + Strengthened management team with several Ozarelix enrollment completed ahead of schedule for key appointments both hormone-dependent prostate cancer and benign prostatic hypertrophy; EOquinTM for superficial F I N A NCE bladder cancer + Built a solid financial foundation with capital + Acquired three drugs – RenaZorb TM , SPI-1620 from experienced, well-known biotechnology and and Lucanthone specialty pharmaceutical institutional investors + Rolling NDA submission begun for Satraplatin + Laid foundation for future non-dilutive in hormone-refractory prostate cancer funding of proprietary oncology pipeline + TM Meetings with the FDA on SPI-1620 and RenaZorb through generics with regulatory filing of five Abbreviated New Drug Applications (ANDAs) P A R T NER S and FDA approval of two ANDAs + Entered alliance talks with Par Pharmaceutical Companies, Inc. to optimize the Company’s generic product program + 1 + DEAR STOCKHOLDERS Cancer is the second leading cause of death in the U.S., responsible for more than 22 percent of all deaths each year in this country. An estimated 1.4 million new cancer cases will be diagnosed in 2006 alone. The National Cancer Institute estimates overall cancer costs to be more than $200 billion annually. The devastating impact of this dreaded disease is felt by each one of us. Our team at Spectrum is committed to improving the lives of people fighting cancer. We’re always on the lookout for late-stage drugs we believe will be novel therapies in the treatment of cancer. Our skills have been honed over several decades, which help us identify innovative drugs with therapeutic potential in treating various forms of the disease. Once we acquire a drug, we use our expertise in clinical trial design and oversight to shepherd it efficiently through the clinic and to market. The process takes time, money and patience. Our strategy is to focus on late-stage drugs because the chance of a drug failing is greater in the early stages of development. Thus, our total investment is less. T HE RIGHT PRODUCTS, PARTNERS AND PEOPLE 2005 has been a pivotal year at Spectrum Pharmaceuticals. During the past three years we have built a solid foundation. We have an extensive pipeline of compounds in various stages of the drug development process. With the right products, partners and people, we believe the Company is ready to transform itself into a successful anti-cancer company. In our business, we use a “risk-reduced” business model that affords us the opportunity to conserve our financial resources while establishing important relationships that allow us to leverage our efforts. For example, + 2 + in February of 2006, we entered into a strategic alliance with PAR Pharmaceutical to optimize the prospects of our generic portfolio. As part of the alliance, PAR Pharmaceutical will make milestone payments to Spectrum based on ANDA approvals. We will also share the profit on the sales of drugs. Under this agreement, PAR covers all legal and marketing expenses for sumatriptan succinate injection, the generic form of GlaxoSmithKline’s Imitrex* injection, for which an Abbreviated New Drug Application (ANDA) was filed with a Paragraph IV certification. We view our generics program as an effective way to help finance our proprietary drug pipeline development with non-dilutive cash, thereby delivering more value to our shareholders. Our relationships with our manufacturing, sales, marketing and distribution partners help us leverage and diversify our capabilities and allow us to focus on many products at the same time, thereby enhancing the probability of our success. Future partnerships will involve out-licensing some of our current drugs to pharmaceutical companies outside the U.S. This will provide us with the strategic and financial resources to continue to develop our diversified portfolio, focusing on the U.S. market, while we leverage our success with strong partners around the world. Over the past year, several accomplished professionals joined our team in key strategic positions, significantly adding to our internal talent base. Employees of their caliber are attracted to Spectrum because of our experienced and accomplished team, strategic vision and corporate culture. These attributes recently earned us the distinction of being named one of “Orange County’s Best Companies to Work For” in the June 9, 2005 edition of OC METRO Magazine, a business lifestyle magazine that distributes news and information for readers in Orange County, California. We are particularly proud of this distinction since we recognize that, in today’s competitive work environment, it is important to not only have a strong strategic vision for future growth, but also to have a culture of success with a dedicated and motivated workforce that cares about what they are building together. Here at Spectrum, we encourage a hardworking yet fun work environment, and I believe that our success in the past few years is a direct result of that work ethic. * Imitrex is a registered trademark of GlaxoSmithKline + 3 + K E Y A CCOMPLISHMENTS + Spectrum Pharmaceuticals currently has nine proprietary drug candidates under development (for one, the NDA has been filed; for another, a rolling NDA filing has begun and is expected to be completed by December 2006; one has completed Phase 2 and is expected to commence a Phase 3 trial by December 2006; three other drugs are in Phase 2 clinical trials). Our diversified portfolio includes eight oncology drugs, four that are relatively