Document


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549
_______________
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): March 6, 2018
SPECTRUM PHARMACEUTICALS, INC.
(Exact name of registrant as specified in its charter)
Delaware
001-35006
93-0979187
(State or Other Jurisdiction
of Incorporation)
(Commission
File Number)
(IRS Employer
Identification No.)

 
11500 S. Eastern Ave., Ste. 240, Henderson, NV
89052
 
(Address of Principal Executive Offices)
(Zip Code)
Registrant's telephone number, including area code: (702) 835-6300
Not Applicable
(Former name or former address if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
¨    Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
¨    Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
¨    Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
¨    Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter). Emerging growth company ¨
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨






Item 2.02    Results of Operations and Financial Condition.
On March 6, 2018, Spectrum Pharmaceuticals, Inc. issued a press release, which, among other matters, sets forth our results of operations for the quarter ended December 31, 2017. A copy of the press release is attached hereto as Exhibit 99.1 and is incorporated herein by reference.
The foregoing information, including Exhibit 99.1, is being furnished under Item 2.02 and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liability of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such a filing.

Item 9.01    Financial Statements and Exhibits.

(d)     Exhibits.

Exhibit No.
 
Description
99.1
 
Press Release dated March 6, 2018







SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 
 
SPECTRUM PHARMACEUTICALS, INC.
 
 
 
 
Date:
March 6, 2018
By:
/s/ Kurt A. Gustafson
 
 
 
Kurt A. Gustafson
Executive Vice President and Chief Financial Officer






EXHIBIT INDEX
Exhibit No.
 
Description
99.1
 



Exhibit

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COMPANY CONTACTS
Shiv Kapoor
Vice President, Strategic Planning & Investor Relations
702-835-6300
InvestorRelations@sppirx.com

Spectrum Pharmaceuticals Reports Fourth Quarter 2017 and Full Year 2017 Financial Results and Pipeline Update
Poziotinib: following promising interim results, the Company is actively enrolling NSCLC patients with exon 20 insertion mutation in a multi-center study.

ROLONTISTM (eflapegrastim): ADVANCE study recently met the primary efficacy endpoint; RECOVER study fully enrolled; BLA filing expected in Q4 2018.

Q4 revenues were $28.6 million, including $27.9 million in product sales.

HENDERSON, Nevada - March 6, 2018 - Spectrum Pharmaceuticals, Inc. (NasdaqGS: SPPI), a biotechnology Company with fully integrated commercial and drug development operations with a primary focus in Hematology and Oncology, announced today financial results for the three-month period and year ended December 31, 2017.

“2017 was a landmark year for Spectrum driven by advancements in our pipeline,” said Joe Turgeon, President and Chief Executive Officer of Spectrum Pharmaceuticals. “Poziotinib has the potential to be a life-altering therapy for cancer patients with exon-20 insertion mutations. ROLONTIS gives Spectrum a near-term opportunity to compete in a blockbuster market. We expect several pipeline milestones in 2018 and we look forward to keeping you updated.”
Pipeline Update:
Poziotinib, an irreversible tyrosine kinase inhibitor:
The Company has initiated a multi-center study which is currently enrolling Non-Small Cell Lung Cancer (NSCLC) patients. This trial will enroll up to 87 patients with EGFR exon 20 insertion mutations and up to 87 patients with HER2 exon 20 insertion mutations at several leading cancer centers. The study will evaluate objective response rate (ORR) as the primary endpoint, and disease control rate (DCR), duration of response (DOR), and safety as secondary endpoints.
An investigator sponsored trial is currently enrolling at the University of Texas MD Anderson Cancer Center in NSCLC patients with exon 20 insertion mutations in EGFR or HER2. The study yielded preliminary results demonstrating evidence of significant antitumor activity in NSCLC patients with EGFR exon 20 insertion mutations, with preliminary data in the first 11 patients showing an unconfirmed Objective Response Rate of 73%. Safety profile was consistent with those previously described for poziotinib and other TKIs. The Company expects additional data from this study in 2018.
An abstract on poziotinib was accepted at AACR. Primarily pre-clinical data will be available at AACR on the anti-tumor activity of poziotinib in HER2 exon-20 insertion mutations in NSCLC.

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Spectrum is also conducting a Phase 2 breast cancer study in the third-line setting in the U.S.
ROLONTIS (eflapegrastim), a novel long-acting GCSF:
A registrational Phase 3 study ADVANCE was initiated under an SPA with the FDA last year to evaluate ROLONTIS in the management of chemotherapy-induced neutropenia. The Company announced the ADVANCE study met the primary efficacy endpoint of non-inferiority in Duration of Severe Neutropenia between ROLONTIS and pegfilgrastim. The adverse event profile was similar between the two treatment arms.
The Company has completely enrolled RECOVER, an international Phase 3 trial that has a similar design.
The Company expects to file the BLA in Q4 2018.
2018 Guidance
The Company expects total revenue to be between $90 to $110 million in 2018. Gross margin is expected to improve primarily as a result of enhancements to Evomela manufacturing. R&D expense is expected increase driven by additional spend on pipeline.

Three-Month Period Ended December 31, 2017 (All numbers are approximate)
GAAP Results
Total product sales were $27.9 million in the fourth quarter of 2017. Product sales in the fourth quarter included: FUSILEV® (levoleucovorin) net sales of $0.9 million, FOLOTYN® (pralatrexate injection) net sales of $11.0 million, ZEVALIN® (ibritumomab tiuxetan) net sales of $3.9 million, MARQIBO® (vinCRIStine sulfate LIPOSOME injection) net sales of $1.2 million, BELEODAQ® (belinostat) for injection net sales of $2.7 million, and EVOMELA® (melphalan) for injection net sales of $8.3 million.
Spectrum recorded net loss of $28.6 million, or $0.29 per basic and diluted share in the three-month period ended December 31, 2017, compared to net loss of $18.1 million, or $0.23 per basic and diluted share in the comparable period in 2016. Total research and development expenses were $22.1 million in the quarter, as compared to $16.0 million in the same period in 2016. Selling, general and administrative expenses were $29.2 million in the quarter, compared to $18.9 million in the same period in 2016.
During the quarter the Company purchased $69.5 million face value of its convertible debentures for $27.3 million in cash and 5.4 million newly-issued shares of our common stock. The Company ended the quarter with cash, cash equivalents and marketable securities of $227.6 million.
Non-GAAP Results
Spectrum recorded non-GAAP net loss of $22.8 million, or $0.23 per basic and diluted share in the three-month period ended December 31, 2017, compared to non-GAAP net loss of $8.1 million, or $0.10 per basic and diluted share in the comparable period in 2016. Non-GAAP research and development expenses were $21.3 million, as compared to $15.4 million in the same period of 2016. Non-GAAP selling, general and administrative expenses were $19.1 million, as compared to $15.6 million in the same period in 2016.


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Twelve-Month Period Ended December 31, 2017 (All numbers are approximate)
GAAP Results
Total product sales were $116.2 million for the twelve months ended December 31, 2017. Total product sales decreased 9.7% from $128.6 million in the same period of 2016.
Product sales in 2017 included: FUSILEV® (levoleucovorin) net sales of $7.3 million, FOLOTYN® (pralatrexate injection) net sales of $43.0 million, ZEVALIN® (ibritumomab tiuxetan) net sales of $11.8 million, MARQIBO® (vinCRIStine sulfate LIPOSOME injection) net sales of $6.6 million, BELEODAQ® (belinostat) for injection net sales of $12.4 million, and EVOMELA® (melphalan) for injection net sales of $35.2 million.
Spectrum recorded net loss of $91.2 million, or $1.07 per basic and diluted share in the twelve-month period ended December 31, 2017, compared to net loss of $69.8 million, or $0.96 per basic and diluted share in the comparable period in 2016. Total research and development expenses were $65.9 million for the year, as compared to $59.1 million in the same period in 2016. Selling, general and administrative expenses were $84.3 million for the year, compared to $88.4 million in the same period in 2016.
Non-GAAP Results
Spectrum recorded non-GAAP net loss of $52.1 million, or $0.61 per basic and diluted share in the twelve-month period ended December 31, 2017, compared to non-GAAP net loss of $16.8 million, or $0.23 per basic and diluted share in the comparable period in 2016. Non-GAAP research and development expenses were $63.4 million, as compared to $54.1 million in the same period of 2016. Non-GAAP selling, general and administrative expenses were $65.4 million, as compared to $64.1 million in the same period in 2016.
Conference Call
Tuesday, March 6, 2018 @ 4:30 p.m. Eastern/1:30 p.m. Pacific
Domestic:     (877) 837-3910, Conference ID# 6369505
International:    (973) 796-5077, Conference ID# 6369505
This conference call will also be webcast. Listeners may access the webcast, which will be available on the investor relations page of Spectrum Pharmaceuticals' website: www.sppirx.com on March 6, 2018 at 4:30 p.m. Eastern/1:30 p.m. Pacific.
About Spectrum Pharmaceuticals, Inc.
Spectrum Pharmaceuticals is a leading biotechnology Company focused on acquiring, developing, and commercializing drug products, with a primary focus in Hematology and Oncology. Spectrum currently markets six hematology/oncology drugs, and has an advanced stage pipeline that has the potential to transform the Company. Spectrum's strong track record for in-licensing and acquiring differentiated drugs, and expertise in clinical development have generated a robust, diversified, and growing pipeline of product candidates in advanced-stage Phase 2 and Phase 3 studies. More information on Spectrum is available at www.sppirx.com.
Forward-looking statement - This press release may contain forward-looking statements regarding future events and the future performance of Spectrum Pharmaceuticals that involve risks and uncertainties that could cause actual results to differ materially. These statements are based on management's current beliefs and expectations. These statements include, but are not

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limited to, statements that relate to Spectrum’s business and its future, including certain company milestones, Spectrum's ability to identify, acquire, develop and commercialize a broad and diverse pipeline of late-stage clinical and commercial products, the timing and results of FDA decisions, and any statements that relate to the intent, belief, plans or expectations of Spectrum or its management, or that are not a statement of historical fact. Risks that could cause actual results to differ include the possibility that Spectrum’s existing and new drug candidates may not prove safe or effective, the possibility that our existing and new applications to the FDA and other regulatory agencies may not receive approval in a timely manner or at all, the possibility that our existing and new drug candidates, if approved, may not be more effective, safer or more cost efficient than competing drugs, the possibility that our efforts to acquire or in-license and develop additional drug candidates may fail, our dependence on third parties for clinical trials, manufacturing, distribution and quality control and other risks that are described in further detail in the Company's reports filed with the Securities and Exchange Commission. The Company does not plan to update any such forward-looking statements and expressly disclaims any duty to update the information contained in this press release except as required by law.

SPECTRUM PHARMACEUTICALS, INC. ®, FUSILEV®, FOLOTYN®, ZEVALIN®, MARQIBO®, BELEODAQ®, and EVOMELA® are registered trademarks of Spectrum Pharmaceuticals, Inc. and its affiliates. REDEFINING CANCER CARE™, ROLONTIS™, and the Spectrum Pharmaceuticals' logos are trademarks owned by Spectrum Pharmaceuticals, Inc. Any other trademarks are the property of their respective owners.


© 2018 Spectrum Pharmaceuticals, Inc. All Rights Reserved





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SPECTRUM PHARMACEUTICALS, INC.
Condensed Consolidated Statements of Operations
(In thousands, except per share amounts)
(Unaudited) 

 
Three Months Ended
December 31,
 
Twelve Months Ended
December 31,
 
2017
 
2016
 
2017
 
2016
Revenues:
 
 
 
 
 
 
 
Product sales, net
$
27,942

 
$
32,195

 
$
116,178

 
$
128,596

License fees and service revenue
627

 
3,041

 
12,189

 
17,848

Total revenues
$
28,569

 
$
35,236


$
128,367

 
$
146,444

Operating costs and expenses:


 

 

 

Cost of sales (excludes amortization and impairment charges of intangible assets)
11,241

 
9,238

 
42,859

 
27,953

Cost of service revenue
138

 
2,174

 
4,359

 
7,890

Selling, general and administrative
29,214

 
18,866


84,267

 
88,418

Research and development
22,134

 
15,995


65,895

 
59,123

Amortization and impairment charges of intangible assets
6,929

 
6,894

 
27,647

 
25,946

Total operating costs and expenses
69,656

 
53,167

 
225,027

 
209,330

Loss from operations
(41,087
)
 
(17,931
)
 
(96,660
)
 
(62,886
)
Other (expense) income:

 

 

 

Interest expense, net
(602
)
 
(2,348
)
 
(6,798
)
 
(9,435
)
Change in fair value of contingent consideration related to acquisitions
(1,721
)
 
600

 
(4,957
)
 
(649
)
Other (expense) income, net
(512
)
 
(102
)
 
389

 
887

Total other expenses
(2,835
)
 
(1,850
)
 
(11,366
)
 
(9,197
)
Loss before income taxes
(43,922
)
 
(19,781
)
 
(108,026
)
 
(72,083
)
Benefit for income taxes
15,366

 
1,677

 
16,778

 
2,313

Net loss
$
(28,556
)
 
$
(18,104
)

$
(91,248
)
 
$
(69,770
)
Net loss per share:
 
 
 
 
 
 
 
Basic and diluted
$
(0.29
)
 
$
(0.23
)

$
(1.07
)
 
$
(0.96
)
Weighted average shares outstanding:
 
 
 
 
 
 
 
Basic and diluted
98,366,416
 
78,401,381

85,115,592
 
72,824,070



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SPECTRUM PHARMACEUTICALS, INC.
Condensed Consolidated Balance Sheets
(In thousands, expect per share and par value amounts)
(Unaudited)
 
December 31,
2017
 
December 31,
2016
ASSETS
 
 
 
Current assets:

 

Cash and cash equivalents
$
227,323

 
$
158,222

Marketable securities
248

 
247

Accounts receivable, net of allowance for doubtful accounts of $71 and $88, respectively
32,260

 
39,782

Other receivables
2,133

 
5,754

Inventories
5,715

 
8,715

Prepaid expenses and other assets
10,067

 
3,930

Total current assets
277,746

 
216,650

Property and equipment, net of accumulated depreciation
589

 
449

Intangible assets, net of accumulated amortization and impairment charges
137,159

 
164,234

Goodwill
18,162

 
17,886

Other assets
53,783

 
29,549

Total assets
$
487,439

 
$
428,768

LIABILITIES AND STOCKHOLDERS’ EQUITY


 


Current liabilities:


 


Accounts payable and other accrued liabilities
$
58,117

 
$
52,483

Accrued payroll and benefits
9,261

 
8,981

Deferred revenue
3,872

 
3,188

FOLOTYN development liability
275

 
861

Convertible senior notes
38,224

 

Total current liabilities
109,749

 
65,513

FOLOTYN development liability, less current portion
12,111

 
12,269

Deferred revenue, less current portion
315

 
323

Acquisition-related contingent obligations
6,272

 
1,315

Deferred tax liabilities
1,438

 
6,675

Other long-term liabilities
6,215

 
9,604

Convertible senior notes

 
97,043

Total liabilities
136,100

 
192,742

Commitments and contingencies


 


Stockholders’ equity:


 


Preferred stock, $0.001 par value; 5,000,000 shares authorized; no shares issued and outstanding

 

Series B Junior Participating Preferred Stock, $0.001 par value; 1,500,000 shares authorized; no shares issued and outstanding

 

Series E Convertible Voting Preferred Stock, $0.001 par value and $10,000 stated value; 2,000 shares authorized; no shares issued and outstanding.

 

Common stock, $0.001 par value; 175,000,000 shares authorized; 100,742,735 and 80,466,735 issued and outstanding at December 31, 2017 and 2016, respectively
100

 
80

Additional paid-in capital
837,347

 
648,384

Accumulated other comprehensive income (loss)
15,999

 
(1,579
)
Accumulated deficit
(502,107
)
 
(410,859
)
Total stockholders’ equity
351,339

 
236,026

Total liabilities and stockholders’ equity
$
487,439

 
$
428,768




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Non-GAAP Financial Measures

In this press release, Spectrum reports certain historical “non-GAAP financial measures,” as defined in Regulation G of the Securities Exchange Act of 1934. Non-GAAP financial measures differ from financial statements reported in conformity to U.S. generally accepted accounting principles (“GAAP”). In accordance with Regulation G, we reconciled each non-GAAP financial measure to its most directly comparable GAAP measure. Management uses non-GAAP financial measures to assess our company’s performance and allocate company resources, and believes that providing these non-GAAP financial measures allows investors to view the Company’s financial results in the way that management views the financial results. We believe non-GAAP disclosures also provide investors with information used generally in our industry for evaluating operating results. Investors should not place undue reliance on non-GAAP financial measures, nor should investors consider non-GAAP financial measures as more meaningful than, or as substitutes or replacements for, financial measures prepared in accordance with GAAP.

The non-GAAP financial measures presented exclude the items summarized in the below table. Management believes that adjustments for these items assist investors in making comparisons of period-to-period operating results and that these items are not indicative of the Company’s on-going core operating performance.

The non-GAAP financial measures presented herein have certain limitations in that they do not reflect all of the costs associated with the operations of the Company’s business as reported under GAAP. Therefore, investors should consider non-GAAP financial measures in addition to, and not as a substitute for, or as superior to, measures of financial performance prepared in accordance with GAAP. The non-GAAP financial measures presented by the Company may be different from the non-GAAP financial measures used by other companies.
























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SPECTRUM PHARMACEUTICALS, INC.
Reconciliation of Non-GAAP Adjustments for Condensed Consolidated Statements of Operations
(In thousands, expect per share amounts)
 
 
Three Months Ended
December 31,
 
Twelve Months Ended
December 31,
 
 
2017
 
2016
 
2017
 
2016
(1)
GAAP product sales, net & license fees and service revenue
$
28,569

 
$
35,236

 
$
128,367

 
$
146,444

 
Non-GAAP adjustments to product sales, net & license fees and service revenue:

 

 
(5,000
)
 
(6,000
)
 
Non-GAAP product sales, net & license fees and service revenue
$
28,569

 
$
35,236

 
$
123,367

 
$
140,444

(2)
GAAP selling, general and administrative expenses
$
29,214

 
$
18,866

 
$
84,267

 
$
88,418

 
Non-GAAP adjustments to SG&A:
 
 
 
 
 
 
 
 
Stock-based compensation
(2,997
)
 
(2,768
)
 
(11,521
)
 
(11,481
)
 
Severance and legal expenses
(7,080
)
 

 
(7,080
)
 

 
Litigation expenses

 
(387
)
 

 
(12,333
)
 
Depreciation expense
(76
)
 
(103
)
 
(316
)
 
(535
)
 
Non-GAAP selling, general and administrative
$
19,061

 
$
15,608

 
$
65,350

 
$
64,069

(3)
GAAP research and development
$
22,134

 
$
15,995

 
$
65,895

 
$
59,123

 
Non-GAAP adjustments to R&D:
 
 
 
 
 
 
 
 
Stock-based compensation
(557
)
 
(554
)
 
(2,235
)
 
(2,190
)
 
Depreciation expense
(2
)
 
(3
)
 
(9
)
 
(11
)
 
Other R&D milestone payments
(250
)
 

 
(250
)
 
(2,826
)
 
Non-GAAP research and development
$
21,325

 
$
15,438

 
$
63,401

 
$
54,096

(4)
GAAP net loss
$
(28,556
)
 
$
(18,104
)
 
$
(91,248
)
 
$
(69,770
)
 
Non-GAAP adjustments to net loss:
 
 
 
 
 
 
 
 
Adjustments to product sales, net & license fees and service revenue, SG&A, and R&D as noted above
10,962

 
3,815

 
16,411

 
23,376

 
Adjustment to cost of sales

 

 
1,000

 

 
Amortization and impairment charges of intangible assets
6,929

 
6,894

 
27,647

 
25,946

 
Adjustments to other (expense) income
3,258

 
959

 
10,914

 
6,011

 
Adjustments to benefit for income taxes
(15,366
)
 
(1,677
)
 
(16,778
)
 
(2,313
)
 
Non-GAAP net loss
$
(22,773
)
 
$
(8,113
)
 
$
(52,054
)
 
$
(16,750
)
(5)
GAAP loss per share (Basic and Diluted)
$
(0.29
)
 
$
(0.23
)
 
$
(1.07
)
 
$
(0.96
)
 
Non-GAAP loss per share (Basic and Diluted)
$
(0.23
)
 
$
(0.10
)
 
$
(0.61
)
 
$
(0.23
)
 
Weighted average shares outstanding:
 
 
 
 
 
 
 
 
Basic and Diluted
98,366,416

 
78,401,381

 
85,115,592

 
72,824,070


(1) Non-GAAP product sales, net & license fees and service revenue: These amounts reflect adjustments to reverse revenue recognition for upfront revenue from out-licenses and revenue from milestone achievement(s) that do not consistently recur. The resulting non-GAAP revenue solely consists of our (i) product sales, (ii) percentage-based royalties from our licensees’ sales, and (iii) on-going service revenue. We believe this measure of non-GAAP revenue is more indicative of the period-over-period success of our core ongoing product sales and service revenue.

(2) Non-GAAP selling, general and administrative: These amounts reflect adjustments to reverse allocated operating expenses for certain non-cash items (including stock-based compensation and depreciation), as well as the reversal of irregular operating expense items such as non-recurring legal fees, settlements and severance. We believe the resulting non-GAAP

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SG&A value is more indicative of the period-over-period success of our administrative expense control, and more reflective of our normalized SG&A expense trends.

(3) Non-GAAP research and development: These amounts reflect adjustments to reverse allocated operating expenses for certain non-cash items (including stock-based compensation and depreciation), as well as non-recurring R&D milestone achievements that we record to expense for our in-licenses. We believe the resulting non-GAAP R&D value is more reflective of our true R&D expense trends.

(4) Non-GAAP net loss: These amounts reflect all non-GAAP adjustments described in (1) through (3) above, plus other non-cash and/or non-recurring items, including: (i) adjustments to reverse royalty expense on receipts from regulatory and sales milestone achievements; (ii) adjustments to reverse operating expenses for non-cash amortization and impairment of intangible assets (the reversal of these non-cash expenses allows for a clearer representation of the period-over-period success of our overall financial results and future working capital requirements); (iii) adjustments to reverse the impact of income taxes; (iv) adjustments to reverse the impact of mark-to-market contingent consideration (although our contingent consideration results from prior acquisitions and is a part of our business strategy, these adjustments through earnings typically result from variables other than our current commercial activity or other operating performance measures that are a focus of our management), (v) reversal of foreign exchange gains and losses (non-cash), (vi) debt discount accretion expense (non-cash) for our convertible notes, and (vii) the loss recorded on the convertible notes repurchase.

(5) Non-GAAP loss per share: These amounts reflect all non-GAAP adjustments in (1) through (4) above to present our overall non-GAAP financial results for each period on a per-share basis.



11500 S. Eastern Ave., Ste. 240 • Henderson, Nevada 89052 • Tel: 702-835-6300 • Fax: 702-260-7405 • www.sppirx.com • NASDAQ: SPPI