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Spectrum, Questcor, and Overhanging Risks

Spectrum Pharmaceuticals (Nasdaq: SPPI  ) recently announced approval from the Food and Drug Administration for a new manufacturing facility for its top-selling drug, Fusilev. While the news is a positive from a risk-management perspective, it does little to address the large cloud looming over the stock. Fusilev's success is largely attributable to supply shortages of a generic drug Leucovorin, used as part of typical chemotherapy treatments for colorectal cancer. As Brenton Flynn explains in the following video, as long as those supply shortages remain, investors can't truly know whether Fusilev will stand on its own or fall to the competition.

The Fusilev overhang has similarities to Questcor Pharmaceuticals' (Nasdaq: QCOR  ) recent dilemma. Insurance reimbursement and government investigation concerns have caused considerable investor doubts around the stock. While both Spectrum and Questcor appear cheap using traditional valuation metrics, these risks will are likely to continue.

The pharmaceutical space is full of double-edged stories of huge growth potential and huge risk. Questcor is one of those stories. We highlight the high-profile issues facing the company inside our brand new premium research report on Questcor. In it, you'll learn about the key opportunities and threats facing the company, as well as multiple reasons to buy and sell the stock. We're providing a full year of analyst updates as key news hits, so make sure to claim a copy today by clicking here now.

Read/Post Comments (3) | Recommend This Article (2)

Comments from our Foolish Readers

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  • Report this Comment On November 27, 2012, at 2:42 PM, Emperor2 wrote:

    This is another report by someone that is totally clueless about Fusilev. This BS story about Fusilev sales drying up is a LIE. Look at Europe and Japan. Generic Leucovorin is not in short supply in Europe or Japan nor has it been in short supply. Yet sales of Fusilev by Pfizer and Sanofi-Aventis in Europe and Takeda in Japan continue to go up. Why will sales in the US go off the cliff when Leucovorin is in adequate supply whereas sales in Europe and Japan have not done so? Are doctor's in Europe and Japan stupid? Are they so much dumber than doctor's in the US? This LIE about what will happen to sales of Fusilev once Leucovorin is in adequate supply has been told long enough and loud enough and by enough people that it has become accepted as fact. But looking at the history in Europe and Japan shows that it is still a LIE. Ain't gonna happen. (Unless, of course, the doctor's in Europe and Japan really are dumber than doctor's in the US, but I doubt that.)

  • Report this Comment On November 27, 2012, at 4:37 PM, phxmike wrote:

    Again, I have to wonder why anyone would make an analysis that leaves out so many significant facts about this stock.

    1- Generic Leucovorin is chemically different

    from Fusilev (Levoleucovorin) and has its own

    J code for insurance billing

    2- The sales have continued to climb in Europe

    (Where generic Leuco exists) and the US where

    generic supply has been growning

    3- Spectrum has locked in many physicians on

    long term supply contracts

    4- The "Shelf Registration" renews one that was

    put in place 3 years ago, AND WAS NEVER

    USED. There is NO reason to expect they

    will use it this time. Many companies do this

    it's just good business to have options moving

    forward. With literally hundreds of milliions in

    free cash, HOW could any analyst imply this

    shelf registration is an issue?

    Just my opinion, do your own due diligence....seems like the analyst could have done more of his own.....

  • Report this Comment On November 30, 2012, at 11:02 AM, realist53 wrote:

    I keep hoping to see real news/insight from articles posted here. But reality is that MF, SA, Street, etc have all become tools for the organized Market Manipulators. At least this one shows some honesty by headlining the word "fool".

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