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 u d i t o r s 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 g e n t 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 s e c 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 W e b s i t e President, Vida International Pharmaceutical www.spectrumpharm.com Consultants; Former Vice President, Business Development, Licensing & Strategic Planning, M a r k e t f o r C o m m o n S t o c 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
p r o d u c ts p e o p 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 n c e 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 n e r s and FDA approval of two ANDAs + Entered alliance talks with Par Pharmaceutical Companies, Inc. to optimize the Company’s generic product program
+ + 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,
+ + 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
+ + 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 late stage: Levofolinic Acid (LFA) for bone and colorectal cancer, Satraplatin for hormone- refractory prostrate cancer, EOquinTM for superficial bladder cancer, and Ozarelix for hormone-dependent prostate cancer and benign prostate hypertrophy.
+ Spectrum acquired the licenses to three new compounds in 2005 with exciting potential: Lucanthone, which is a Phase 2 drug for the treatment of brain tumors; SPI-1620, a preclinical compound that selectively and transiently dilates blood vessels in a tumor, increasing the delivery of anti-cancer drugs to that tumor; and RenaZorbTM, a preclinical compound for the treatment of hyperphosphatemia in kidney disease.
+ The Company was named as a founding member of a new NASDAQ Health Care Index — underscoring the progress we have made in rebuilding a solid pharmaceutical business in just under three years and providing greater recognition of our commitment to developing prescription drugs for the treatment of cancer. Also in 2005, as further validation of our success, Spectrum was added to the Russell Micro Cap Index.
+ In September 2005 we completed a $42 million public offering, which has reinforced our balance sheet and put us in an excellent position to fund our operations and clinical development initiatives. As of December 31, 2005, the Company had cash and marketable securities of approximately $64 million.
+ Three generic drug ANDAs are approved and ten generic drug ANDAs are pending at the FDA, one filed under Paragraph IV certification to attempt to gain 180-day generic exclusivity.
+ + L o o k i n g A h e a d Our primary business focus for 2006, and beyond, will be to continue to aggressively acquire, develop and commercialize proprietary oncology drugs with a mix of near-term and long-term revenue potential. We believe that 2006 and 2007 will be transformational years for the Company as several of our products reach critical milestones in the drug approval process, with possible market launches:
+ Phase 3 clinical trial data for Satraplatin in prostate cancer (fall 2006) + Completion of NDA filing for Satraplatin (fourth quarter 2006) + Initiation of Phase 3 trial in the U.S. for EOquinTM in superficial bladder cancer (fourth quarter 2006) + Patent trial on sumatriptan injection (fourth quarter 2006) + Submission of CMC responses to the NDA for LFA (first quarter 2007)
If we are successful in achieving these milestones, we expect to have several proprietary products on the market, with revenue anticipated by late 2007 or early 2008. With so many exciting developments, we have never been more optimistic about our prospects for the future. In closing, I would like to thank our stockholders, employees, board members and strategic partners for their continued support. We are committed to making Spectrum a successful company. We believe in our mission and we appreciate your belief in us.
Rajesh C. Shrotriya, M.D. Chairman, CEO and President Spectrum Pharmaceuticals, Inc. May 30, 2006
+ + our drug pipeline
Spectrum’s diverse portfolio includes proprietary product candidates in various stages of clinical development.
P r o d u c t I n d i c T I o n P r e c li n i c L p H S e I p H S e I I p H S e I I I n d / A n d a A p p r o v L
Levofolinic Acid (LFA) Colorectal Cancer & Osteogenic Sarcoma
Satraplatin Hormone-Refractory Prostate Cancer
Sumatriptan Injection Migraine
EOquin™ Superficial Bladder Cancer
Ozarelix (SPI-153) Hormone-Dependent Prostate Cancer
Ozarelix (SPI-153) Benign Prostatic Hypertrophy
Ozarelix (SPI-153) Endometriosis
Elsamitrucin Refractory Non-Hodgkin’s Lymphoma
Lucanthone Brain Tumor & Brain Metastases
SPI-1620 Adjunct to Chemotherapy
RenaZorb™ Hyperphosphatemia in End-stage Renal Disease
SPI-205 Chemo-Induced Neuropathy
Late Stage Phase 2 Pre-Clinical our drug pipeline
Spectrum’s diverse portfolio includes proprietary product candidates in various stages of clinical development.
P r o d u c t I n d i c T I o n P r e c li n i c L p H S e I p H S e I I p H S e I I I n d / A n d a A p p r o v L
Levofolinic Acid (LFA) Colorectal Cancer & Osteogenic Sarcoma
Satraplatin Hormone-Refractory Prostate Cancer
Sumatriptan Injection Migraine
EOquin™ Superficial Bladder Cancer
Ozarelix (SPI-153) Hormone-Dependent Prostate Cancer
Ozarelix (SPI-153) Benign Prostatic Hypertrophy
Ozarelix (SPI-153) Endometriosis
Elsamitrucin Refractory Non-Hodgkin’s Lymphoma
Lucanthone Brain Tumor & Brain Metastases
SPI-1620 Adjunct to Chemotherapy
RenaZorb™ Hyperphosphatemia in End-stage Renal Disease
SPI-205 Chemo-Induced Neuropathy
a n n u L r e po r t: Yr. 05 Spectrum
The following pages feature three of our most exciting, near-term opportunities to benefit patients.
As you read, you will meet some of the people behind the scenes, and learn why they have the passion to do battle against these debilitating diseases.
+ + Daniel M. Pertschuk, M.D. After 15 years practicing internal medicine and over a decade in the biotech industry, Dr. Pertschuk joined Spectrum as Vice President of Medical Affairs, designing protocols for the implementation of clinical trials. “Working with cancer drugs presents very distinct challenges, but the potential to+ affect + people’s lives is immense — and very gratifying.” Pro duct Pro file : No. 1 Levofolinic Acid Initial Target Indication: Colorectal Cancer /Osteogenic Sarcoma
Indications Properties Colorectal cancer chemotherapy Pure active isomer of leucovorin (folinic acid) Methotrexate rescue therapy in osteogenic sarcoma Benefit Mode of Action We believe the pure form will be preferred by U.S. Enhances the anti-tumor effects of 5-fluorouracil (5-FU) oncologists for its more reliable dose delivery and its Reduces side effects of methotrexate resultant potential for improved clinical efficacy and Administration safety. It already sells well in Europe and Japan Intravenous & Oral
Status T r g e t e d a r e a D e m o g r a p hi c f o r c o l o r e c T L LFA is a proprietary drug for which two NDAs (oral and c a n c e r injectable formulations) for osteogenic sarcoma have Females & Males – age 50+ been submitted and reviewed by the FDA and the Oncol- ogy Drug Advisory Committee of the FDA, which has recommended both for approval. LFA has received two FDA orphan drug designations for colorectal cancer in combination with 5-FU and for osteogenic sarcoma in use with methotrexate rescue. As soon as the initial NDA for osteogenic sarcoma is approved, we will file a supple- mental NDA for colorectal cancer. The time to market is expected to be approximately 12 to 18 months, meaning we could have this important drug available to patients by late 2007.
Potential Market th e o p p o siti o n The market is currently $200 million outside North America. Spectrum has rights within North America and expects the potential to be similar in size. Colorectal cancer is the fourth most common cancer in the U.S. with 145,000 new cases being diagnosed annually. 2,700 new cases of osteogenic sarcoma are diagnosed each year in the U.S. The only drug on the market in this country that contains leucovorin is calcium leucovorin, a racemic mixture with only 50% of the active drug LFA. The other 50% is the inactive isomer and it has been shown to compete with the active L form for its biochemical and pharmacologic effects, thus potentially resulting in decreased and more variable effectiveness. That is why we believe LFA has such excellent market potential, and why we believe the Oncology Drug Advisory Committee of the FDA has interest in making it available.
+ 10 + Melissa Siegel, M.D. Former pediatric oncologist in a teaching hospital in New York, Dr. Siegel joined Spectrum as Associate Director of Clinical Research in September 2005. “It’s rewarding to see the process I help design actually being implemented — and the therapeutic implications of what we’re doing have the potential to make a real difference.” Pro duct Pro file : No. 2 Satraplatin Initial Target Indication: Prostate Cancer
Indications Properties Hormone-refractory prostate cancer Anti-tumor activity in preclinical models is comparable Mode of Action to cisplatin and carboplatin with less cross-resistance Satraplatin binds and induces crosslinking between Satraplatin has been shown in a Phase 1 trial to DNA strands and between DNA and proteins leading to enhance the anti-tumor activity of ionizing radiation disruption of the cell division process and to cell death benefit Administration Oral drug regimens can be taken at home Oral (Satraplatin is the first orally administered Well tolerated and less renal toxicities common with platinum compound) other platinum based drugs, demonstrated in clinical trials to date.
T r g e t e d a r e a D e m o g r a p hi c Status Males – age 50+ A Phase 3 study in hormone-refractory prostate can- cer began in September 2003, completed accrual in December 2005, and final data is expected in the Fall 2006. The primary endpoint of this study is progres- sion-free survival. Satraplatin has been given fast track review designation by the FDA. Satraplatin is currently being co-developed by Spectrum Pharmaceuticals and GPC Biotech, A.G. Target commercial U.S. launch is in late 2007. A number of studies are being conducted or planned to evaluate the potential utility of satraplatin in a number of other tumor types, either alone or in a number of combinations with other anticancer drugs or with
radiation therapy. th e o p p o siti o n Potential Market Worldwide annual sales of platinum compounds is about $2 billion. The market potential for Satraplatin in prostate cancer is estimated at approximately $500 million annually. An estimated 234,000 new cases of prostate cancer in the U.S. are diagnosed each year, and the annual number of deaths resulting from it is estimated to be 27,350. Prostate cancer is the second leading cause of cancer-related deaths in men. Hormone-refractory prostate cancer is seen in about 30%-40% of prostate cancer patients.
+ 12 + Chris Nardo, Ph.D. “My challenge as Executive Director, Data Management and Biostatistics is to streamline the design of our clinical research to ensure a clear and statistically reliable answer in the shortest time possible. The minute I walked in the door here at Spectrum, I knew this was the place I wanted to be. I was impressed by the people.” Pro duct Pro file : No. 3 EOquin™ Initial target Indication: Bladder Cancer
Indications Properties Superficial bladder cancer Bladder tumor cells have high levels of the enzyme Mode of Action DT-diaphorase, which activates EOquin™ to the active EOquin™ is a bioreductive prodrug that is activated by cytotoxic metabolic reducing enzymes that are over expressed by cancer benefit cells to form the active alkylating agent Shown strong efficacy and tolerability in clinical studies Administration conducted to date Intravesical therapy (installation into the urinary bladder) Current standard of care often requires a series of treatments and surgeries to remove tumors EOquin™ is administered directly into the bladder to treat tumors
T r g e t e d a r e a D e m o g r a p hi c Status Predominately Males – age 55-85 Phase 3 trial is in preparation and is planned to initiate in late 2006, after completion of small pilot study. In prior Phase 1 and Phase 2 trials in superficial bladder cancer, 67% of patients had a complete response.
Potential Market The worldwide market is estimated to be $300-500 million annually. Bladder cancer is a relatively common malignancy with more than 61,000 new cases diagnosed annually in the U.S. It is the fifth most common cause of cancer death. Superficial forms of bladder cancer represent
approximately 80% of new cases; they recur frequently th e o p p o siti o n after surgery. Currently in the U.S. approximately 500,00 patients are fighting bladder cancer. Even though prophylactic intravesical therapy with Bacillus Calmette Guerin (BCG), mitomycin or doxorubicin may delay the recurrence, there is a need for improved chemotherapeutic agents.
+ 14 + J. Alfred Witjes, M.D. Chairman, Urology Group of the EORTC (European Organization for Research and Treatment of Cancer) Dr. Witjes was principal investigator in the Phase 2 clinical studies for EOquinTM. “I individualize therapies for different patients based on a variety of physiological factors and tumor characteristics in order to prevent over or under treatment. EOquinTM is the first real news we’ve had in 30 years for the treatment of non-invasive bladder cancer.” Pro duct Pro file : No. 4 Generic Products Near-term Revenue Opportunity
13 ANDAs filed, 3 approved drugs Expect multiple approvals in 2006 and 2007 Signed alliance with PAR Pharmaceutical Each approval triggers milestone for sales and marketing payment from PAR • More than $10 million in milestone payments Additional ANDA filings planned in 2006 and 2007 and equity investment starting in 2006 Sumatriptan injection has large market potential • Profit sharing with launch possible in late 2007 depending on • Improved marketing capability the outcome of the litigation. This could lead to a 180 day generic exclusivity
Sumatriptan In February 2005, GlaxoSmithKline (GSK) commenced suit against us, alleging that our ANDA for sumatriptan succinate injection, the generic form of GSK’s Imitrex® injection, infringes their patent. Imitrex® injection is used for the acute treatment of migraine attacks and of cluster headache episodes in adults, and recorded estimated U.S. revenues of approximately $200 million in 2005. We believe that the patent that we have chal- lenged covering GSK’s Imitrex® injection, which, with pediatric exclusivity, is set to expire on February 6, 2009, is invalid, unenforceable and/or or will not be infringed by our generic product candidate. Imitrex® injec- tion is also covered by a patent which together with pediatric exclusivity does not expire until June 28, 2007, which patent is not currently being challenged by us or any third party. If the FDA approves our ANDA and we are successful in our patent challenge, and are awarded six months of generic market exclusivity because we believe that we were the first to file an ANDA for sumatriptan succinate injection, we could launch our sumat- riptan succinate injection product after the expiry of the June 2007 patent. Further information regarding this patent challenge can be found in the enclosed Annual Report on Form 10K.
* Imitrex is a registered trademark of GlaxoSmithKline
+ 16 + UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-K