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Spectrum Looking More Investable

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In May, I suggested that investors might want to hold off on investing in Spectrum Pharmaceuticals (Nasdaq: SPPI  ) , but it's looking more investable as time goes on.

Spectrum has the same problem that's plagued Momenta Pharmaceuticals (Nasdaq: MNTA  ) : It's hard to value the unknown. In Momenta's case, it's the fear that it'll gain additional competition for its generic version of Sanofi's (NYSE: SNY  ) Lovenox. For Spectrum, it's the fear that generic competition will come back.

Fusilev, which goes by the chemical name levoleucovorin, competes directly with the generic-but-still-works leucovorin. Fortunately for Spectrum, generic-drug makers -- Teva Pharmaceutical (Nasdaq: TEVA  ) and others -- have had a hard time making luecovorin, which has allowed Fusilev to thrive. Sales of the drug used to avoid chemotherapy side effects skyrocketed from $6 million in the third quarter of last year to $41 million this year.

Valuing Spectrum is still difficult, though. How do you guess when Teva and others will get their act together? And then when -- dare I say, if -- they do, how do you estimate how many doctors will head back to the generic? Unlike a generic that's picked up at a pharmacy by a patient, cancer patients aren't likely to question their doctor about the cost of their medication, so we're basically wondering which doctors would prefer what they were using prior to the shortages versus what they're using now.

Every quarter that goes by pads the company's coffers and makes it a little easier to hold onto doctors that become more comfortable using Fusilev. Even with the company bumping up against its 52-week high set back in July, there would seem to be some room to run higher, although investors are right to remain a little skittish about the generic competition.

Keep track of all our Foolish analysis on Spectrum Pharmaceuticals by adding it to the Fool's free My Watchlist service. Just click here to get started.

Fool contributor Brian Orelli holds no position in any company mentioned. Click here to see his holdings and a short bio. The Motley Fool owns shares of Teva Pharmaceutical Industries and Momenta Pharmaceuticals. Motley Fool newsletter services have recommended buying shares of Teva Pharmaceutical Industries and Momenta Pharmaceuticals. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Read/Post Comments (2) | Recommend This Article (0)

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Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On October 31, 2011, at 8:55 PM, Ameilia wrote:

    Sppi's product is inferior to the generics.ask the oncologists

  • Report this Comment On November 03, 2011, at 3:43 PM, hellomojo wrote:

    More to Spectrum than just Fusilev sales; plus it look slike odds of luecovorin ever being made in high enough quantity to fill the needed market are unlikely. Spectrum also has some several nice drug candidates that should be up for approval next year. But I really like most is management. CEO Dr. Rajesh Shrotriya seems to understand how to grow the company intelligently.

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