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Why Spectrum Pharmaceuticals Stock Soared in October

Person's fingers walking up a series of stack coins.

What happened

Spectrum Pharmaceuticals (NASDAQ: SPPI) , a small-cap oncology company, saw its shares gain a whopping 39.2% in October, according to S&P Global Market Intelligence . The drugmaker's stock took flight after the company announced positive interim results from a midstage study assessing poziotinib in patients with EGFR-positive non-small cell lung cancer (NSCLC). Poziotinib's preliminary NSCLC data were presented at the World Conference on Lung Cancer in Japan in mid-October.

Person's fingers walking up a series of stack coins.

Image source: Getty Images.

So what

Because lung cancer remains the most common malignancy in the world, poziotinib should be able to rack up several hundred million in annual sales even as a niche product (patients that express this particular subtype of NSCLC). And that's certainly a big deal for a company that's projected to generate only $131 million in revenue next year.

Now what

Before investors get too excited, though, it's important to remember that these are preliminary results, and poziotinib still has a long ways to go before a regulatory filing is a real possibility. The company's newly initiated multicenter midstage trial for poziotinib, after all, won't read out until late 2020, according to clinicaltrials.gov.

Spectrum's decision to explore poziotinib's anti-cancer properties in multiple trials at once should also result in a substantial rise in costs moving forward, and that could trigger a sizable secondary offering soon. While the biotech did exit the most recent quarter with a respectable $248 million in cash and cash equivalents, Spectrum's cash runway doesn't appear to extend beyond 2019 at this point based on its current cash burn rate and near-term growth prospects.

In sum, Spectrum is definitely an intriguing watchlist candidate following this unexpected clinical development, but the company still has a lot of work to do before its stock is a compelling buy from a fundamental perspective.

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George Budwell has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy .

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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