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Commercial and Drug Development Drug Products
12 Months Ended
Dec. 31, 2011
Commercial and Drug Development Drug Products [Abstract]  
Commercial and Drug Development Drug Products

3. Commercial and Drug Development Drug Products

We currently market two oncology products, ZEVALIN and FUSILEV. In addition, we have several products in clinical development, primarily including apaziquone which has completed patient enrollment for two Phase 3 clinical trials for bladder cancer and belinostat is being studied under a Special Protocol Assessment, or SPA, in a Phase 2 trial for relapsed or refractory PTCL. The following is a brief description of our key products as of December 31, 2011.

ZEVALIN: ZEVALIN is a prescribed form of cancer therapy called radioimmunotherapy which combines a source of radiation, called a radioisotope, with an antibody.

During the year ended December 31, 2011, 2010 and 2009, we recorded net revenues of $27.6 million, $29.0 million and, $15.7 million, respectively from sales of ZEVALIN.

In December 2008, we partnered with Cell Therapeutics, Inc., or CTI, to form a 50-50 owned joint venture, RIT Oncology, LLC, or RIT, to commercialize and develop ZEVALIN, a CD20-directed radiotherapeutic antibody, in the U.S. We paid $15 million for our 50% interest in RIT. Pursuant to provisions of the 2008 joint-venture agreement, in March 2009, we acquired the remaining 50% ownership of RIT for $16.5 million, resulting in RIT becoming our wholly-owned subsidiary. In April 2009, we disputed payment of an installment of $3.5 million of the $16.5 million, on the grounds that CTI’s unpaid liabilities pertaining to ZEVALIN, and CTI’s share of joint venture expenses equaled or exceeded the installment amount. In May 2009, we received an arbitration award of approximately $4.3 million. The entire $3.5 million was released to us and CTI additionally paid us approximately $0.8 million. The award was final, binding and non-appealable by either party.

The assets contributed by CTI to RIT were all of its interests in the ZEVALIN business, which included the U.S. development, sales and marketing rights to ZEVALIN as well as other assets acquired in the December 2007 agreement with Biogen. The assets acquired included the ZEVALIN FDA registration, FDA dossier, U.S. trademark, trade name and trade dress, customer list, certain patents and the assignment of numerous contracts. There was no continuity of physical facilities or personnel from the December 2007 transaction. The assets contributed by CTI to RIT also included the assets acquired in the June 2008 Access Agreement with Bayer Schering Pharma AG, which held the rights to ZEVALIN outside of the U.S. at that time. Under the Access Agreement, Bayer gave CTI access to data from Bayer’s Phase 3 first-line indolent trial of ZEVALIN. Finally, the assets contributed by CTI to RIT included CTI’s September 30, 2008 submission of the ZEVALIN supplemental Biologics License Application, or sBLA, for use in first-line consolidation therapy for patients with B-cell follicular NHL. The joint venture also assumed obligations of $2.2 million in current liabilities and certain contingent obligations.

 

In December 2008, the FDA had accepted for filing and review, and granted priority review status for a sBLA for the use of ZEVALIN as part of a first-line therapy for patients with previously untreated follicular non-Hodgkin’s lymphoma, or NHL. The sBLA application was approved by the FDA on September 3, 2009, which now allows the use of ZEVALIN for a substantially larger patient population. ZEVALIN is now FDA approved and marketed by Spectrum for treatment of patients with previously untreated follicular NHL who achieve a partial or complete response to chemotherapy and with relapsed or refractory, low-grade or follicular B-cell NHL, including patients who have rituximab-refractory follicular NHL. In connection with the FDA approval, we paid $8.5 million in milestone payments. In November 2009, the Centers for Medicare & Medicaid Services, or CMS finalized a policy to allow reimbursement for ZEVALIN®, in the Hospital Outpatient Prospective Payment System, based on the Average Sales Price methodology applicable to other injectable drugs and biologicals. This reimbursement methodology went into effect on January 1, 2010.

In November 2011, we received approval from the FDA to remove the pre-treatment biodistribution evaluation requirement, commonly referred to as the bioscan from the ZEVALIN administration procedures.

As of December 31, 2011, our agreements with ZEVALIN partners included potential future payments for regulatory milestones totaling approximately $10.0 million.

In January 2012, we entered into an agreement to acquire licensing rights to market ZEVALIN outside of the U.S. from Bayer Pharma AG. See note 16.

FUSILEV for Injection: FUSILEV is the only commercially available drug containing only the pure active L-isomer of racemic (L and R forms) leucovorin. FUSILEV is currently indicated after high-dose methotrexate therapy in patients with osteosarcoma, and to diminish the toxicity and counteract the effects of impaired methotrexate elimination or inadvertent overdose of folic acid antagonists.

We commercially launched FUSILEV in August 2008 and recorded net revenues of approximately $153.5 million, $32.0 million, and $12.5 million from FUSILEV sales for the years ended December 31, 2011, 2010 and 2009 respectively.

In April 2006, we acquired all of the oncology drug assets of Targent, Inc. The principal asset in the transaction was a license agreement to market FUSILEV in the field of oncology in North America. We paid an up-front fee in common stock, with a fair market value of approximately $2.7 million. As part of the consideration for the purchase of these assets, we agreed to pay milestone payments to Targent upon the achievement of certain regulatory events as well as for certain sales levels for FUSILEV within a calendar year. In connection with the achievement of the FDA approval milestone in April 2011, we issued an aggregate amount of 733,715 shares of common stock to certain of Targent’s stockholders, as directed by Targent. We capitalized $6.3 million associated with this regulatory milestone as intangible assets during 2011 which is being amortized over the estimated useful life of 8.7 years.

In addition, in the event that aggregate net sales of FUSILEV, as defined in the agreement, exceed $40 million and or $100 million during any calendar year, we are to pay to Targent $5 million in cash or the common stock equivalent thereof for each milestone. These milestone payments are in effect only with respect to the first calendar year in which aggregate net sales combined exceed such amount and not with respect to any subsequent calendar year in which aggregate net sales of the products combined exceed such amounts. In connection with the achievement of the first sales milestone of $40 million in May 2011 we issued 577,367 shares of common stock to certain of Targent’s stockholders, as directed by Targent. In September 2011, we achieved the second sales milestone of $100 million and paid $5 million in cash. The aggregate amount capitalized as intangible assets for these two sales milestones aggregated $10.4 million, which are being amortized over the estimated useful life of 8.6 years. Included in cost of goods sold expense for the year ended December 30, 2011 is $1.0 million related to the amortization of these milestones.

As of December 31, 2011, we have met all of the contractual milestones related to FUSILEV.

 

In 2009 we recorded stock-based research and development charges of $185,000 which represents the fair market value of 125,000 shares of our common stock issued in March 2009 as milestone payments to Targent, LLC.

Apaziquone: Apaziquone, a synthetic drug which is activated by certain enzymes present in higher amounts in cancer cells than in normal tissues, is currently being developed for non-muscle invasive bladder cancer.

In October 2008, we signed an exclusive development and commercialization collaboration agreement with Allergan for apaziquone. Under the terms of the agreement, Allergan paid us an up-front non-refundable $41.5 million at closing and will make additional payments of up to $302.5 million based on the achievement of certain development, regulatory and commercialization milestones. We retained exclusive rights to apaziquone in Asia, including Japan and China. Allergan received exclusive rights to apaziquone for the treatment of bladder cancer in the rest of the world, including the U.S., Canada and Europe.

In the U.S., we will co-promote apaziquone with Allergan and share equally in its profits and expenses. Allergan will also pay us royalties on all of its apaziquone sales outside of the U.S. Under the terms of the agreement, we will continue to conduct the development program, including the manufacture of clinical supplies and two Phase 3 registrational trials, and will be jointly responsible for obtaining regulatory approval for the product. Both parties share development expenses with Allergan bearing 65% of the cost. Pursuant to our revenue recognition policy, we will recognize the up-front payment of $41.5 million over the period of the development work, estimated at 4 to 5 years. As of December 31, 2011, and 2010, we have classified $8.3 million of such amount recorded on the consolidated balance sheet as current portion of deferred revenue.

In December 2009, we completed enrollment of our two Phase 3 pivotal clinical trials enrolling more than 1,600 patients with non-muscle invasive bladder cancer. As per the collaboration agreement with Allergan, we recorded a $1.5 million milestone payment from Allergan. Such amount was received in January 2010.

In November 2009, we entered into a collaboration agreement with Nippon Kayaku for the development and commercialization of apaziquone in Asia, except North and South Korea, referred to as the Nippon Kayaku Territory. In exchange, Nippon Kayaku paid us an up-front payment of $15.0 million, which was received in January 2010, and agreed to make additional payments of up to $136.0 million based on the achievement of certain regulatory and commercialization milestones. Nippon Kayaku received exclusive rights to apaziquone for the treatment of non-muscle invasive bladder cancer in Asia (other than North and South Korea), including Japan and China. Under the terms of the Nippon Kayaku collaboration agreement, Nippon Kayaku will conduct the apaziquone clinical trials pursuant to a development plan. In addition, Nippon Kayaku will be responsible for all expenses relating to the development and commercialization of apaziquone in the Nippon Kayaku Territory.

Also in November 2009, we entered into collaboration agreement with Handok for the development and commercialization of apaziquone for the treatment of non-muscle invasive bladder cancer in North and South Korea. Under the terms of the Handok collaboration agreement, Handok paid us an up-front payment of $1.0 million, which was received in January 2010, and potential milestone payments totaling approximately $18.6 million. The potential milestones will be based on the achievement of certain regulatory and commercialization milestones. Additionally, Handok will conduct the apaziquone clinical trials pursuant to a development plan and will be responsible for all expenses relating to the development and commercialization of apaziquone in North and South Korea.

Belinostat: Belinostat is a histone deacytelase, or HDAC, inhibitor that is being studied in multiple clinical trials, both as a single drug and in combination with chemotherapeutic drugs for the treatment of various hematological and solid tumors.

The following describes the principal commercial terms relating to belinostat licensing and development.

In February 2010, we entered into a licensing and collaboration agreement with TopoTarget, for the development and commercialization of belinostat, pursuant to which TopoTarget and the Company agreed to a collaboration for the development and commercialization of belinostat. The agreement provides that we have the exclusive right to make, develop and commercialize belinostat in North America and India, with an option for China. The agreement also grants TopoTarget a co-promote option if and only if we do not maintain a minimum number (subject to adjustment for certain events outside of our control) of field personnel (as defined in the agreement) for a certain number of years post-approval of the PTCL indication.

 

In consideration for the rights granted to us under the license and collaboration agreement with TopoTarget, we paid TopoTarget an up-front fee of $30.0 million which is recorded as research and development expense in the accompanying consolidated financial statements. In addition, we will pay up to $313 million and one million shares of Spectrum common stock based on the achievement of certain development, regulatory and sales milestones, as well as certain royalties on net sales of belinostat.

Under the terms of the agreement, all development, including studies, will be conducted under a joint development plan and in accordance with a mutually agreed upon target product profile provided that we have final decision-making authority for all developmental activities in North America and India (and China upon exercise of the option for China) and TopoTarget has final decision-making authority for all developmental activities in all other jurisdictions. We will assume all responsibility for and future costs of the ongoing registrational PTCL trial while TopoTarget will assume all responsibility for and future costs of the ongoing Phase 2 CUP trial. We and TopoTarget will conduct future planned clinical trials pursuant to the joint development plan, of which we will fund 70% of the development costs and TopoTarget will fund 30% of the development costs.

Under the terms of the agreement, we will each pay 50% of the costs for chemical, pharmaceutical and other process development related to the manufacturing of the product that are incurred with a mutually agreed upon budget in the joint development plan. TopoTarget is responsible for supplying us with both clinical and commercial product.