What happened

Shares of Spectrum Pharmaceuticals (SPPI) rose over 21% last month, according to data provided by S&P Global Market Intelligence. The company's stock took a hit in late September after reporting what analysts considered unimpressive data for poziotinib, one of its most important drug candidates, in non-small cell lung cancer.

Last month served as a brief reprieve for shareholders following management's admission on the third-quarter 2018 earnings conference call that it will seek Breakthrough Therapy Designation, a label that could significantly accelerate development, for poziotinib. That's because the data were actually relatively impressive. Investors should know the U.S. Food and Drug Administration's decision before the end of the year.

The excitement over potentially making analysts eat their hats was short-lived, however. Spectrum Pharmaceuticals announced results from an important study in early December that once again failed to impress analysts -- although, once again, the data were relatively solid.

A chart on a chalkboard showing steady gains followed by an abrupt loss.

Image source: Getty Images.

So what

In the first nine months of 2018, 5 of 6 approved products in the company's portfolio saw sales decline compared with the year-ago period. The only drug to post year-over-year gains was Folotyn, a treatment for relapsed or refractory peripheral T-cell lymphoma (PTCL), which grew revenue a relatively ho-hum 11.6% to around $36 million. That certainly raises the stakes for the early 2019 launch of a new injectable drug called Khapzory, the development of poziotinib in lung cancer, and efforts to increase sales of Folotyn. 

Spectrum Pharmaceuticals is working hard on the latter. One problem affecting the drug's market opportunity is that patients taking the therapy often develop painful ulcers in their mouths, or a condition called oral mucositis. In early December the company announced results from the first study taking aim at that problem, demonstrating that oral Khapzory lowered the incidence of grade 2 mucositis caused by Folotyn to just 5.7%, compared with a historical rate of 52%.

Mr. Market sent shares sharply lower on those results, although the reason why isn't quite clear. Either way, the early stage approach will take years of development before hitting the market. 

Now what

Unfortunately for shareholders, Spectrum Pharmaceuticals has become a punching bag for Wall Street in the second half of 2018. That could change if the company delivers the goods in the next few months. The most important catalyst: The FDA is expected to decide on whether or not to grant poziotinib Breakthrough Therapy Designation by the end of the year. That could serve as an important catalyst for the business, especially since analysts already appear to be pricing in disappointing news on that front.

That said, investors cannot overlook the fact that the business reported an operating loss of $89 million and burned $50 million from operations in the first nine months of 2018. Without big wins -- and maybe even with one or two -- Spectrum Pharmaceuticals could struggle to get on better financial footing.