Please ensure Javascript is enabled for purposes of website accessibility

Is Spectrum Pharmaceuticals Still a Buy After Surging Higher in April?

By George Budwell - May 11, 2016 at 2:03PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The biotech's stock gets a lift on a positive regulatory development last month.

SPPI Chart

SPPI data by YCharts.

What: Shares of Spectrum Pharmaceuticals (SPPI -1.33%) gained 11.5% last month, according to data from S&P Global Market Intelligence. The primary catalyst behind the biotech's surge higher was the news that the FDA granted Evomela seven years of orphan drug exclusivity. The FDA approved Evomela earlier this year as both a high-dose conditioning treatment prior to hematopoietic stem cell transplantation in patients with multiple myeloma (MM), as well as a palliative treatment for MM patients unable to take an oral therapy. Spectrum gained Evomela's worldwide commercialization and development rights from Ligand Pharmaceuticals (LGND 1.52%) in 2013. 

Image source: Spectrum.

So what: Evomela's peak sales are forecast to range from $100 to $200 million, meaning that it probably won't be a major revenue driver for the company going forward. That said, this extended period of exclusivity should allow the company to realize a greater return on investment over Evomela's entire life cycle. 

Now what: Because Spectrum owes royalties to Ligand on Evomela's sales, the Street isn't optimistic that this newly approved product can make much of an impact on the company's flagging top line following the loss of exclusivity for its bone cancer drug Fusilev. Specifically, analysts are predicting that Spectrum's top line will drop by nearly 18% this year and by another 15% in 2017. Consequently, all eyes remain on the drugmaker's emerging clinical pipeline of anti-cancer drugs such as SPI-2012 that's indicated for chemotherapy-induced neutropenia in patients with breast cancer, and apaziquone, which is presently under regulatory review as a possible treatment for non-muscle-invasive bladder cancer.

The bottom line is that Spectrum remains a fairly risky stock at this stage in its evolution due to the lack of a franchise-level product in its current portfolio. While that could change within the next year or so as its pipeline matures, my take is that this biotech is perhaps best viewed as a strong watchlist candidate heading into apaziquone's target PDUFA date of Dec. 11, 2016.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Spectrum Pharmaceuticals, Inc. Stock Quote
Spectrum Pharmaceuticals, Inc.
$0.77 (-1.33%) $0.01
Ligand Pharmaceuticals Incorporated Stock Quote
Ligand Pharmaceuticals Incorporated
$90.58 (1.52%) $1.36

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 07/02/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.