Spectrum's Quarter Gets No Respect

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Rodney Dangerfield's most famous line was "I get no respect." Spectrum Pharmaceuticals (Nasdaq: SPPI  )  might be feeling like Rodney after releasing its third-quarter results. Just a couple of days ago, I listed three things that investors should watch with Spectrum's earnings. Let's look at how things turned out.

Walking the talk
Spectrum CEO Rajesh Shrotriya stated in August that the company was on pace to hit $300 million in revenue for 2012. Analyzing the year-to-date numbers for Spectrum and Allos Therapeutics, which the company picked up in September, prior to the earnings announcement showed that he could be on target.

Now that the third-quarter results are in, we now know Shrotriya hit the bulls-eye dead on. The company reported consolidated revenue of $69 million. That puts Spectrum at nearly $198 million for the first nine months of 2012, up 41% from the same period in 2011. The company now expects pro forma revenue to go over $300 million for the current year.

Earnings for the third quarter were $0.33 per diluted share, down a penny from the same quarter in 2011. Non-GAAP earnings, though, jumped from $0.38 per diluted share last year to $0.42 per diluted share in 2012.

No generic worries for Fusilev 
One of the keys to Spectrum's success is Fusilev. However, some have worried that generic rivals could chip away at sales for the drug. Were there any hints that those worries could be well-founded?

Fusilev's numbers for the quarter answer that question. Spectrum saw strong growth for the drug in two important metrics. Accounts ordering Fusilev jumped 13% compared to the second quarter of 2012. Market penetration increased from 29% last quarter to 31% this quarter.

Of course, solid numbers for one quarter don't necessarily mean that generic competition won't be a factor in the future. Teva Pharmaceuticals (NYSE: TEVA  ) and other makers of generic leucovorin could resolve their manufacturing issues. 

Spectrum notes, though, that Fusilev sales continue to grow in other countries where generic shortages don't exist. That continued growth primarily helps Sanofi (NYSE: SNY  ) , Pfizer (NYSE: PFE  ) and Takeda, which market the drug outside of the United States. However, their experiences give Spectrum reason to believe that Fusilev can remain successful in the U.S. even if generic rivals resolve their problems.

Allos assimilation
The third factor that I thought investors should watch was the assimilation of Allos Therapeutics into the Spectrum organization. Sometimes, companies can obtain expected synergies earlier than originally expected or even gain more synergies than initially thought possible. That's exactly what seems to be the case with Spectrum.

The company stated that the integration of Allos was "exceeding expectations." Spectrum originally thought that the synergies to be obtained would be in the $40 million to $50 million range. Now, it believes those synergies will at least hit $50 million and perhaps higher.

No respect?
There are still many naysayers who aren't convinced that generics won't hurt Fusilev sales, though. With a 60% short interest, a lot of folks have a vested interest in Spectrum shares going down rather than up.

Spectrum delivered a solid performance in third quarter. Revenue looks good. The Allos integration is going better than expected. However, shares rose less than 1% during intraday trading. That's pretty much what I predicted, though. Don't feel too bad, Spectrum. Sometimes, you just get no respect.

Rodney Dangerfield took his lack of respect straight to the bank, becoming a successful comedian and actor. Some stocks that don't get respect can make investors successful, too. Check out our new free report that highlights three stocks that aren't getting respect from Wall Street but could be "middle-class millionaire-makers." Just click here to read it now.

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