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Why Spectrum Pharmaceuticals Stock Is on Fire Today

By George Budwell – Jul 28, 2020 at 12:00PM

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Spectrum scores a key win in the clinic with its experimental lung cancer drug.

What happened

Spectrum Pharmaceuticals (SPPI 7.20%), a small-cap biotech, is up big today following a positive midstage readout for its non-small cell lung cancer (NSCLC) drug poziotinib. Specifically, the drugmaker's shares are up by 23% on heavy volume as of 11:11 a.m. EDT Tuesday morning.  

So what

Poziotinib is targeting previously treated NSCLC patients who exhibit the HER2 exon 20 insertion mutation. As there are no approved treatments for this specific form of the disease, Spectrum has a realistic shot at generating several hundred million in annual sales from this experimental cancer drug. That's a big deal for a biotech company with a market cap of just $466 million at the time of writing.

A doctor inspecting a lung X-ray

Image source: Getty Images.

Now what

This midstage trial was reportedly designed to be a registrational study. Therefore, Spectrum hopes these encouraging data will be enough to gain the blessing of the Food and Drug Administration (FDA) following a formal review. The company thus plans on discussing a New Drug Application with the agency in the near future. So, if everything goes according to plan, poziotinib could be on the market by perhaps late 2021. 

That being said, there is no way to predict how the FDA will react to these midstage trial results. While there is a clear documented need for a viable treatment option for lung cancer patients with this specific mutation, the FDA may still require another trial prior to a formal regulatory review. Data from the first cohort of this study, after all, weren't nearly as encouraging.

George Budwell has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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