Spectrum Pharmaceuticals (SPPI) Posts Strong Earnings in Q2 - Analyst Blog

Spectrum Pharmaceuticals ' ( SPPI ) shares gained 5.9% immediately after the company reported its second-quarter 2014 results. Shares further increased 1.4% in the following trading session. Overall shares have been 7.5% since the announcement.

Spectrum Pharma reported second-quarter 2014 earnings (including stock-based compensation and depreciation) of 16 cents per share, compared to the year-ago loss of 15 cents. Second-quarter 2014 results compared favorably to the Zacks Consensus Estimate which stood at a loss of 14 cents.

Revenues increased 41% from the year-ago quarter to $46.9 million beating the Zacks Consensus Estimate of $42 million. The increase in revenues was attributable to higher product sales.

The Quarter in Details

Spectrum Pharma's revenues in the reported quarter consisted of revenues from product sales. Product revenues increased 45.5% year over year to $46.9 million. This consisted of revenues from Fusilev, Folotyn, Zevalin and Marqibo.

Fusilev generated revenues of $26.6 million, up 106% year over year.

Sales from Folotyn came in at $12.6 million, flat year over year. However, sales increased 25% sequentially mainly driven by end-user demand. The company expects Folotyn sales in the range of $10 million − $12 million.

Zevalin sales came in at $6.3 million and Marqibo contributed $1.4 million to the company's net revenue in the second quarter of 2014.

In Jul 2014, the FDA approved Beleodaq for the treatment of patients suffering from relapsed or refractory peripheral T-cell lymphoma. We remind investors that Spectrum Pharma had gained development and commercialization rights to Beleodaq (in North America, India and with an option for China) following a licensing and collaboration agreement with TopoTarget A/S in 2010. Folotyn is also approved for this indication in the U.S.

Adjusted research and development expenses (including stock-based compensation and depriciation) declined 12.1% year over year to $11.3 million.

Adjusted selling, general and administrative expenses (including stock-based compensation and depreciation) were $24.5 million, up 13.2% year over year. This was mainly due to higher legal, sales and marketing costs.

Pipeline Update

Spectrum Pharma is developing Captisol-enabled melphalan for use as a conditioning treatment prior to autologous stem cell transplant for patients suffering from multiple myeloma. The company intends to file a new drug application (NDA) for the same in the U.S. by year end.

Additionally, Spectrum Pharma has completed patient enrollment in a phase II study on SPI-2012 for the treatment of chemotherapy-induced neutropenia. The company will meet the FDA for end of Phase II meeting before the end of 2014.

Spectrum Pharma discontinued the phase III (ZEST) study on Zevalin as a consolidation therapy for the treatment of patients suffering from diffuse large B-cell lymphoma. This decision was based on the fact that the trial was proceeding slowly and required a significant capital investment. The company has decided to invest in new smaller studies on Zevalin targeting unmet medical conditions.

Our Take

We are encouraged by Fusilev's performance which was the primary growth driver for Spectrum Pharma during the reported quarter. We are also pleased with the company's efforts to expand its product portfolio and pipeline. The company has a number of regulatory events lined up in the remainder of 2014. We expect investor focus to remain on further updates from the company.

Spectrum Pharma currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the health care sector are Endo International ( ENDP ), Gilead Sciences ( GILD ) and Mallinckrodt ( MNK ). All these stocks hold 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 Nasdaq, Inc.

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

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