Wider-than-Expected Loss at Spectrum Pharma - Analyst Blog

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Spectrum Pharmaceuticals ( SPPI ) reported second quarter of 2013 loss (including stock-based compensation but excluding other special items) of 13 cents per share, wider than the Zacks Consensus Estimate of a loss of 11 cents. The company had reported earnings of 32 cents per share in the year-ago quarter. Results were affected by lower revenues.

Quarter in Details

Spectrum Pharma's revenues in the reported quarter came in at $33.2 million, down 51.6% year over year. The massive decline in total revenues was primarily due to lower product sales. Revenues in the second quarter were also well below the Zacks Consensus Estimate of $52 million.

Spectrum Pharma recorded quarterly revenues from product sales and licensing fees during the quarter. Product revenues in the reported quarter were down 50.9% year over year to $32.2 million. This consisted of revenues from Fusilev, Folotyn and Zevalin.

Fusilev continued to perform miserably in the quarter. The drug is approved for the treatment of metastatic colorectal cancer. Spectrum Pharma recorded Fusilev sales of $12.9 million in the reported quarter, down 77.2% from the year-ago quarter. The massive decline in Fusilev sales was due to the reduction in orders from wholesalers for the product. Sales were also down due to a lower end-user demand and lower net price. Fusilev's demand in the hospital segment declined significantly during the quarter. Demand in the clinic segment was also down by a small margin.

Management, however, believes that Fusilev sales will ramp up in the latter half of the year. Spectrum Pharma expects to generate Fusilev sales of around $20−$25 million per quarter in the second half of 2013.

Sales from Folotyn, which was added to Spectrum Pharma's portfolio following its acquisition of Allos Therapeutics, Inc. in Sep 2012, came in at $12.6 million in the second quarter of 2013, up 27.3% sequentially. Folotyn is available in the U.S. for the treatment of patients with relapsed or refractory peripheral T-cell lymphoma (PTCL).

Zevalin sales during the reported quarter came in at $6.8 million. In Apr 2012, Spectrum Pharma acquired the licensing rights to market Zevalin outside the U.S. Zevalin is currently marketed for the treatment of non-Hodgkin's lymphoma. Spectrum Pharma is looking to expand the drug's label. Zevalin is being studied in a phase III study for the treatment of patients suffering from diffuse large B-cell lymphoma.

Spectrum Pharma also received $1.0 million as licensing fees during the quarter, compared with $3.1 million in the year-ago quarter.

The company's adjusted research and development (R&D) expenses of $12.9 million during the quarter shot up 34.9% year over year. The increase in R&D expenses during the quarter was primarily due to higher clinical expenses. Adjusted selling, general and administrative (SG&A) expenses in the second quarter of 2013 came in at $22.6 million, up 12.5% year over year.

Other Developments

Meanwhile the company is gearing up to launch its fourth product, Marqibo, by the end of the year. Marqibo was added to Spectrum Pharma's portfolio through the acquisition of Calif. based Talon Therapeutics in Jul 2013. Marqibo is currently approved in the U.S. for the treatment of adults suffering from Philadelphia chromosome-negative (Ph-) acute lymphoblastic leukemia (ALL) in second or greater relapse or whose disease has progressed after two or more anti-leukemia therapies. The same sales force which currently sells Spectrum Pharma's Folotyn and Zevalin is expected to be utilized for Marqibo. The addition of Marqibo will boost Spectrum Pharma's oncology portfolio.

Spectrum Pharma also said that it intends to file a New Drug Applications (NDA) for its pipeline candidate Belinostat (relapsed or refractory peripheral T-cell lymphoma) by year end. Furthermore, the company plans to file for Captisol-enabled melphalan (multiple myeloma) by next year.

Our Take

Though we are encouraged by the company's efforts to expand its product portfolio, we remain concerned about the declining Folotyn sales. We expect investor focus to stay on the drug's performance apart from Marqibo in the coming quarters.

Spectrum Pharma currently carries a Zacks Rank #4 (Sell). Other stocks like Biogen Idec Inc. ( BIIB ), Gilead Sciences Inc. ( GILD ) and Actelion Ltd. ( ALIOF ) presently look more attractive with a Zacks Rank #1 (Strong Buy).



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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Business , Stocks

Referenced Stocks: ALIOF , ALL , BIIB , GILD , SPPI

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