DESCRIPTION OF BUSINESS, BASIS OF PRESENTATION, AND OPERATING SEGMENT

(a) Description of Business

Spectrum Pharmaceuticals, Inc. (“Spectrum,” the “Company,” “we,” “our,” or “us”) is a biopharma company, with a primary strategy comprised of acquiring, developing, and commercializing a broad and diverse pipeline of clinical and commercial products. We have an in-house clinical development organization with regulatory and data management capabilities, in addition to commercial infrastructure and a field-based sales force for our marketed products. Currently, we have seven approved oncology/hematology products (FUSILEV, KHAPZORY, FOLOTYN, ZEVALIN, MARQIBO, BELEODAQ, and EVOMELA) that target different types of non-Hodgkin's lymphoma ("NHL"), advanced metastatic colorectal cancer ("mCRC"), acute lymphoblastic leukemia ("ALL"), and multiple myeloma ("MM").

We also have two drugs in late-stage development:


•	Poziotinib, a novel pan-HER inhibitor under investigation for non-small cell lung cancer ("NSCLC") tumors with either EGFR or HER2 exon-20 insertion mutations; and


•	ROLONTIS, a novel long-acting granulocyte colony-stimulating factor ("G-CSF"), analog for chemotherapy-induced neutropenia.

On January 17, 2019, we entered into a definitive asset purchase agreement for the sale of our FDA-approved product portfolio of FUSILEV, KHAPZORY, FOLOTYN, ZEVALIN, MARQIBO, BELEODAQ, and EVOMELA to Acrotech Biopharma L.L.C. ("Acrotech"), a New Jersey-based wholly-owned subsidiary of Aurobindo Pharma USA Inc. (the "Acrotech Transaction"). Upon the closing of the Acrotech Transaction, we are entitled to receive up to $160 million in an upfront cash payment (of which $4 million will be held in escrow for six months). In addition, we expect a purchase price adjustment for certain ongoing research and development activities of the commercialized product portfolio. We are also entitled to receive an aggregate $140 million upon Acrotech's achievement of certain regulatory and sales-based milestones relating to this product portfolio. We plan to reduce our staff by approximately 90 employees, the majority of which we expect to transition to Acrotech. The accounting recognition and financial reporting for the disposal of this commercial component of our business will be reflected in our financial statements in the period corresponding with its closing.

(b) Basis of Presentation

Principles of Consolidation

The accompanying Consolidated Financial Statements have been prepared in accordance with U.S. generally accepted accounting principles ("GAAP") and with the rules and regulations of the Securities and Exchange Commission ("SEC"). These financial statements include the financial position, results of operations, and cash flows of Spectrum and its subsidiaries, all of which are wholly-owned (except for Spectrum Pharma Canada ("SPC")), as discussed below. All inter-company accounts and transactions among these legal entities have been eliminated in consolidation.

Variable Interest Entity

We own fifty-percent of SPC, a legal entity organized in Quebec, Canada in January 2008. Some of our clinical studies are conducted through this “variable interest entity” (as defined under applicable GAAP). We fund all of SPC’s operating costs, and since we assume all risks and rewards for this entity, we meet the criteria as being its “primary beneficiary” (as defined under applicable GAAP). Accordingly, SPC’s balance sheets and statements of operations are included in our Consolidated Financial Statements as if it were a wholly-owned subsidiary for all periods presented.

We operate in one reportable operating segment that is focused exclusively on developing and marketing oncology and hematology drug products. For the years ended December 31, 2018, 2017, and 2016, all of our revenue and related expenses were solely attributable to these activities. Substantially all of our assets (excluding our cash held in certain foreign bank accounts and our ZEVALIN distribution rights for the ex-U.S. territories - see Note 3(g)) are held in the U.S.