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Here's Why Spectrum Pharmaceuticals Fell as Much as 13.1% Today

By Maxx Chatsko - Dec 27, 2018 at 2:54PM

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The biopharma announced that one of its drug candidates is closer to hitting the market, but investors aren't in a celebratory mood.

What happened

Shares of Spectrum Pharmaceuticals ( SPPI 1.31% ) fell more than 13% today after the company announced that it has submitted a Biologics License Application (BLA) for eflapegrastim. The drug candidate, branded as Rolontis, is intended to treat low white blood cell count in patients receiving certain types of chemotherapy. It successfully hit all primary and secondary endpoints in two large-scale trials that tracked 643 patients and is expected to be approved by the U.S. Food and Drug Administration.

So why are shares tumbling today? While Rolontis is likely to become the first new granulocyte colony-stimulating factor (G-CSF) to hit the market in 15 years, analysts are projecting relatively tame peak sales that won't be achieved until the mid-2020s. That's a long time away. Considering Spectrum Pharmaceuticals' stock collapsed earlier this month following news that the FDA rejected the company's bid for breakthrough therapy designation for one of its promising drug candidates, it appears many investors are simply selling before the end of 2018 to harvest tax loss benefits.

As of 2:22 p.m. EST, the stock had settled to an 11.5% loss.

A finger tracking a declining stock chart on a touchscreen.

Image source: Getty Images.

So what

Rolontis is projected to hit peak sales of $200 million in the next decade and achieve annual revenue of $105 million by 2022, according to analysts at investment bank B. Riley FBR. That's not too impressive, but it will be a welcome addition to the product portfolio nonetheless. After all, Spectrum Pharmaceuticals generated just $80 million in revenue in the first nine months of 2018 and posted an operating loss of $88.6 million.

Investors just don't seem to be a in a patient mood lately. In mid-December, the biopharma's attempt to accelerate the development of poziotinib, a promising lung cancer drug candidate, were snuffed out by the FDA -- and the stock dropped nearly 40% on the news. While the market viewed that as a step backward, it's important to remember that failing to earn breakthrough therapy designation simply means Spectrum Pharmaceuticals will go through normal development activities. In other words, not much has changed.

Now what

Spectrum Pharmaceuticals hasn't been getting much respect from Mr. Market in recent months. Despite Spectrum turning in relatively solid data for its drug candidates, analysts have been more fixated on the inability to accelerate development efforts and data that are merely good, not great. But if the business can keep its head down and continue making progress, then it may not be long before Wall Street is forced to hand the company a higher market cap.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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