What happened

In response to reporting fourth-quarter earnings, shares of Spectrum Pharmaceuticals (SPPI), a beaten-down clinical-stage biotech, rose 19% on Friday.

So what

Spectrum doesn't have any revenue yet, so the financial numbers in its "earnings" report aren't really all that meaningful. However, here are a few of the key figures from the quarter:

  • GAAP net loss was $40.2 million, or $0.36 per share. That was lower than the $53.1 million net loss that was experienced in the year-ago period.
  • On an adjusted basis, net loss was $33.4 million, or $0.30 per share. That was worse than the $0.26 adjusted net loss that Wall Street was expecting.
  • Cash balance at year-end was $224 million. 
Colorful drugs on top of hundred dollar bills

Image source: Getty Images.

The most likely reason that shares are up today is that Spectrum announced that its biologics license application (BLA) for its drug Rolontis has been accepted by the Food and Drug Administration (FDA) for review. The agency plans on issuing a go/no go ruling on the drug by Oct. 24, 2020.

What's more, Spectrum announced that it will present data on another compound called poziotinib at the 11th Annual Congress on Pulmonary and Respiratory Medicine in March.

Traders overlooked the larger-than-expected loss and are focusing on the good regulatory news. 

Now what

The last 18 months have been an absolute nightmare for Spectrum's investors. Shares have fallen more than 88% from their highs in mid-2018. That means that winning FDA approval for Rolontis in October is critical to turning this company's fortunes around.

Will everything go according to plan? That's hard to say at this point, which is exactly why investing in biotechnology companies is so difficult. Given the uncertainty, my plan is to watch this story unfold from the sidelines.